SMSF’s under scrutiny for ‘loose’ loans

The ATO has reiterated it will be investigating self-managed super fund members who have an estimated $600 million in related-party loans for shares and property in their funds.

Some members are taking out loans with a related party, which refers to friends, associates or family, on terms more favourable than what might have been attained from a bank. The tax office is concerned that these loans are not being made and maintained on a strict commercial basis and so, are breaching regulations. The ATO is willing to assist members who are caught up in such arrangements and resolve any issues.

There are certain characteristics that can help lenders identify these inappropriate loans:

– no compensation.

– no repayments.

– a single lump sum when the loan term ends.

– the loan amount provided for 100 per cent of the value of the assets purchased.

– the lender has not sought personal guarantees from the members of the fund.