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Bruce4Tax(Taxicorn)Taxicorn
2 May 2026

What are the consequences?


  1. If the loan is to a member or individual associate, then that is a breach of the investment rules
  2. 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
  3. 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
  4. 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.



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1 replies
7 views
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All replies

alauddin(Enthusiast)Enthusiast
4 May 2026

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.

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RE: What happens when a loan is provided on a non‑arm’s‑length basis from an SMSF? | ATO Community