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Acquisition of units in 'Related Unit Trust'

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Generally, SMSFs cannot acquire assets from a related party.

 

But of course with exceptions, including:

a. Listed securities

b. Business Real Property

c. IHA

d. Investments in 13.22c Trust or Company

 

Question:

Can a SMSF acquire units from a related Unit Trust (UT) which has borrowings?

 

Thoughts:

Since the UT has an outstanding borrowing, exception (d) above is not applicable.

So, exception (c) will apply.

I don't think the fact that the UT has borrowings has something to do with exception c?

Hence, the SMSF can purchase units from the related UT (geared) but just have to make sure that IHA rules are to be followed and complied with.

 

Can anyone confirm?

 

Thanks a lot.

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Devotee Registered Tax Practitioner

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Sounds correct.

 

 

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Best answer

Devotee Registered Tax Practitioner

Replies 2

Sounds correct.

 

 

Initiate

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Thanks for your confirmation Bruce4tax.

ATO Certified

TaxTime Support

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Hi @JCSMSF

 

Welcome to our Community.

 

The investment that you have outlined sounds like an in-house asset. We have information about in-house assets on our website if you want to have a read.

 

An in-house asset is:

  • a loan to a related party
  • an investment in a related party
  • an investment in a related trust, or
  • a lease with a related party.


Self-managed super funds are restricted from lending to, investing in or leasing to a related party.

 

There are some exceptions, including:

  • business real property that is leased between your fund and a related party of your fund
  • some investments in related non-geared trusts or companies
  • most investments and loans entered into before 11 August 1999.

 

In-house assets can't be more than 5% of your fund’s total assets.

 

If you require further guidance, you are welcome to make a request for self-managed superannuation fund specific advice.

 

Hope this helps.

 

Thanks,

 

ChrisR

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