A legal expert has stressed the importance for deposits on SMSF properties to be made in the fund’s name as the ability to rectify an error with these transactions is very limited and can lead to unwanted compliance issues.
Business Depot legal director Neal Dallas noted the deposit for many SMSF properties is paid personally by the fund members in the understanding they can simply be reimbursed for the outgoing. However, Dallas explained there is potentially only one legal course of action to fix the problem.
“[Instead of seeking reimbursement], we might say $1000 has gone in as a payment on behalf of the fund and we’re going to treat that as a contribution by the member to the fund and the fund has then applied to pay the deposit,” he told attendees of an Accurium technical webinar today.
He recognised this course of action may still trigger some compliance issues.
“In a lot of cases that won’t cause an issue, but if we’ve got someone who has maxed out their concessional contributions and their non-concessional contributions or don’t have capacity to make non-concessional contributions, we’ll have problems as well,” he said.
He warned against having the fund simply reimburse the amount as this will definitely lead to compliance breaches.
“One of the issues there is if we pull money out of super [and pay it to] a member, that’s [illegal] early release and that’s the way the tax office is going to look at it,” he noted.
Further, he confirmed treating the amount as a loan to the fund will not provide a satisfactory outcome either.
“If we have a fund that has borrowed from a member, it has breached the borrowing restriction. So having a loan in the first place is going to cause some grief,” he said.
