SMSF’s borrowing from related parties
On 9 September 2010, the ATO released an Interpretative Decision (ID) that is applicable for the year ending 30 June 2009. The ID is in relation to section 109 of the Superannuation Industry (Supervision) Act 1993 (Cth) and the ATO has indicated that section does not prohibit loans from related parties to SMSF’s where the terms are favourable to the SMSF.
Key points of note in respect of the ID are:
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it only relates to instances where a lower interest rate than that which is commercially available in the market has been agreed between the parties;
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the other terms and conditions of the loan must be on terms that are not more favourable to the related party ie arm’s length and supported by documentation and appropriate record keeping; and
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it does not apply where a loan is made by the SMSF to a related party. Such loans, must be an arm’s length transaction on favourable terms to the SMSF.
To discuss further, please contact:
Jeff Baker| Partner
T +61 7 3100 5167
Victor Asoyo| Associate
T +61 7 3100 5049
