Regulation, SMSF

Knowledge of SIS sections critical

SIS act

Knowing the specific differences between parts of the SIS Act that may seem the same is critical to allow advisers to find optimal client solutions.

An SMSF consultant has stressed the importance for practitioners to recognise the specific differences in the legislation governing the exemptions allowing the acquisition of assets from a related party.

Advisers Digest founder Peter Johnson suggested knowing the intricate details contained in section 66 of the Superannuation Industry (Supervision) (SIS) Act would assist in advising clients in particular circumstances, such as upon the breakdown of a marriage.

In particular, Johnson warned professionals needed to understand the difference between SIS Act section 66 (2)(b) and section 66 (2B).

“Does anyone know what [SIS Act] section 66 (2)(b) is? That’s an exemption [allowing] business real property [to be acquired from a related party]. However, section 66 (2B) is different,” he noted during a presentation at the SMSF Auditors Association of Australia Conference held in Sydney recently.

“When you’re talking, they sound like the same but they’re different.”

He pointed out SIS Act section 66 (2)(b) allows an SMSF trustee to acquire an asset from a related party if it constitutes business real property and is quite well known.

“But [SIS Act section 66] (2B) is a relatively unknown exemption where if you’re transferring an asset from one super fund to another super fund for the purpose of one of the parties of [a marriage breakdown] rolling out of this super fund into that super fund, then [the transaction] is not prohibited,” he noted.

He suggested knowing this difference is critical because it will allow items such as residential property to be acquired for a specific purpose legitimately from a related party.

According to Johnson, this level of knowledge will aid practitioners in being able to justify certain agreements with third parties in the event of the divorce of spousal trustees of an SMSF.

“I’ve been through this fight with the lawyers at a bank because they read (2B) as (2)(b). [As a result] they said we’ll need a legal opinion as to whether or not you can do this,” he said.

He said when the details of the two subsections were provided in writing, the lawyers acknowledged the transaction was legitimate.

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