A loan was provided on a non‑arm’s‑length basis from the SMSF. The auditor is likely to issue a qualified report for this reason.
- What are the consequences?
- What is the remedy?
36 views
36 views3 replies
3 replies
36 views
3 replies
All replies
What are the consequences?
- If the loan is to a member or individual associate, then that is a breach of the investment rules
- If the loan is to a associated company or trust, then that is a breach of the investment rules if the loan is nor than 5% of SMSF assets or on non-commercial terms
- You need to prepare a rectification plan that shows how the SMSF will be bought back to a proper position - submit to auditor, then follow the plan
- Failure to rectify may result in penalties on trustees, and maybe even disqulification of trustees.
What is the remedy?
Depends on the facts.
If it is possible to fix by putting on commercial terms, then this must be done.
If not, then loan must be repaid to SMSF + interest ASAP.
The loan wasn't provided to any related party, but it was provided on non‑commercial terms. For example, interest accrued monthly for the first six months (instead of being payable monthly), then interest will be accrued on a certain % and paid with the principal at maturity.
Best to get proper advice based on full facts.
Featured articles
10 Apr 2025 · 4 min read time
8 June 2023 · 2 min read time
28 Aug 2025 · 5 min read time