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Dionna(Initiate)Initiate
3 Dec 2024

Hi,

During 23/24 FY, the closely held unit trust overpaid the distribution back to my SMSF (more than the net profit amount due to more cash in the trust bank account).


In SMSF books, would this overpaid distribution income be better treated as negative distribution receivable or redemption of units. Will there be any compliance issues for this to be taken up as either way.


Thank you.


Kind Regards


Dionna

644 views
3 replies
644 views
3 replies

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Most helpful reply

Bruce4Tax(Taxicorn)Taxicorn
3 Dec 2024

  1. Redemption of units would be the best fix, but a bit late to do it now - would involve back-dating docs = illegal
  2. Arguable that this is a borrowing from a related party
  3. Arguable that could make a non-geared unit trust breach its IHA exemption conditions
  4. Best to discuss with SMSF auditor - urgently




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Most helpful reply

Bruce4Tax(Taxicorn)Taxicorn
3 Dec 2024

  1. Redemption of units would be the best fix, but a bit late to do it now - would involve back-dating docs = illegal
  2. Arguable that this is a borrowing from a related party
  3. Arguable that could make a non-geared unit trust breach its IHA exemption conditions
  4. Best to discuss with SMSF auditor - urgently




Liked by Dionna
oldSBSCHwasEasy(Initiate)Initiate
3 Dec 2024

To add to the list in equal 1st position for some trusts that have property. Unit Trusts can usually distribute Tax Free (usually created by way of Depreciation) & Tax Deferred (Usually created by way of Building Allowance) income. This is a neat alternative to redeeming units and has tax benefits for the SMSF in certain phases.

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Overpaid distribution from related unit trust to SMSF | ATO Community