The latest on SMSF

SMSF and Financial Assistance

The Tax Office has released an SMSF Ruling in which it explains the prohibition on trustees of SMSFs giving financial assistance to a member of a fund (or a relative of the member) using the resources of the fund.

The Ruling reinforces that providing financial assistance to a member (or a relative of the member) will contravene the superannuation legislation, regardless of whether such assistance was requested by the member or given through a third party

According to the Ruling, financial assistance includes any arrangement or transaction whereby the assets of the SMSF are converted into other assets, diverted, diminished or put at risk, or there is prejudice to the financial position of the SMSF.

SMSF and Sole Purpose Test

The Tax Office has also released an SMSF Ruling, which outlines the Commissioner's approach to the application of the sole purpose test in the superannuation legislation.

The objective of the sole purpose test is to limit the provision of superannuation benefits to a range of prescribed retirement or retirement-related circumstances, such as on or after a member retiring or attaining 65 years of age. Where an SMSF is maintained for other purposes, it will contravene the sole purpose test.

The Tax Office says that in determining the purpose for which an SMSF is being maintained requires a survey of all of the events and circumstances relating to its maintenance.

The Ruling notes that investments such as works of art, antiques, classic cars and wine will, generally, pose particular issues in relation to the application of the sole purpose test.

TIP: While investments in collectables are not prohibited per se, an SMSF wanting to invest in such investments will need to ensure that the fund's deed permits it and the trustee must show how acquiring these assets will satisfy the sole purpose test.