Trustees can rely on a reasonable approach to be applied by the regulator in situations of genuine adversity, according to an SMSF technical expert.
SMSF Professionals’ Association of Australia (SPAA) technical and professional standards director Graeme Colley offered this opinion in response to a specific scenario raised in a session at the industry body’s national conference in Brisbane last week.
The situation in question involved business real property that was damaged and needed repair in a shorter time frame than could have been achieved via a claims process through the fund’s insurance company.
Effectively the members of the fund had to pay for the repairs themselves to enable the continued operation of their business, however, due to the time spent securing a reimbursement from the insurer, the payments were treated as a contribution rather than an expense.
While the legislation states in these matters the only way to avoid having these payments being categorised as contributions is to have the insurance reimbursement made immediately, Colley said explaining the nature of the situation would probably result in a lenient and practical response from the regulator.
“The reimbursement [in this situation] is going to take some time. You can’t say it was intended to be a contribution or a way of getting around the contributions [rules],” he said.
“Someone’s paid it on behalf of the superannuation fund because it keeps that asset intact, which is more important because the obligations of the trustees is to make sure the assets of the fund are being maintained properly.
“If the auditors did see that as a breach due to the materiality aspect of it, hopefully the ATO would not treat it as a contribution simply because of the insurer being so late.”