A technical team leader has confirmed the forgiveness of a charge for goods and services an SMSF trustee performs will form the value of the contribution requiring recognition from the monetary treatment of the transaction.
Colonial First State head of technical services Craig Day illustrated the point using an example where a trustee who is also a builder performed work on a property owned by his SMSF and the fund was invoiced $250,000 for the job, but then the bill was withdrawn.
Day acknowledged practitioners may be under the impression the value of the contribution in this situation will be defined by the market value of the work performed as that will represent the increase in capital the super fund receives, or a capital transfer amount.
However, he pointed out debt forgiveness is a separate circumstance requiring the action to be treated as a contribution and as such needs to be valued in a different manner.
“We actually have an example in [ATO Taxation Ruling 2010/1] that deals with this exactly and basically it says it will be a contribution because you’ve increased the capital value of the fund, but the value of the contribution will be the value of debt that is forgiven,” he told delegates at the SMSF Association National Conference 2025 held in Melbourne last week.
“[Specifically] the ruling talks about actual services provided by a company [with] an invoice raised and then the shareholders of the company [subsequently] forgive the invoice.
“So in that situation I think you’ve got an argument to say that I’ve forgiven the debt, I haven’t value transferred and therefore [the contribution is for] the value of my services, not the increase in market value, which could be very, very different.”
According to Day, it is critical the trustee is actually running a business that enables him to legitimately charge his fund for the work performed and that the invoice raised is proper.
