The ATO has raised its concerns over arrangements where SMSF are allocating money to certain investment vehicles that then loan the amounts back to the fund trustees.
“We understand some individuals and organisations are promoting arrangements where SMSF monies are deposited into unit trusts or pooled investment trusts less a management fee,” the tax office said.
“This money is then used to obtain a personal or business-related mortgage, which results in the SMSF assets being used to provide members with current-day benefits.”
The regulator warned trustees it was currently focusing on the validity of those types of arrangements.
Specifically, the ATO said it was concerned those types of investments represented a breach of the sole purpose test as they did not seem to be designed to provide retirement savings benefits for SMSF members.
“Our view is that the primary purpose of such arrangements is to enable individuals and any associates to use their super savings, rather than assets held outside the fund, to provide assistance to members or relatives,” it explained.
To avoid placing an SMSF in breach of the sole purpose rule under those circumstances, the regulator recommended trustees use a licensed independent financial adviser and seek the advice of the tax agent of the fund prior to investing in one of the schemes.
