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SMSF - investing in a private company where a trustee is an employee

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Newbie

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I am thinking of establishing an SMSF and investing part of the fund in a private company (equity) as a shareholder.   I would be an employee of said private company but have no directorship in the company.  

 

The SMSF’s holding in this private company would be around 5%.

 

Can the SMSF invest under these circumstances (ie employee of the private company), if trust deeds allow?

 

Your guidance is greatly appreciated.

 

 

 

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Devotee Registered Tax Practitioner

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The SMSF is allowed to make this investment if the fact match what you have said.

 

However, unless the private company can provide audited accounts every year before your SMSF accounts are finalised,  you will have difficulty in persuading your SMSF auditor that the SMSF accounts are true and fair.

 

This is because the SMSF must revalue all investments to market value each year, and without an audit of the private company the auditor cannot rely on the private company accounts as an indicator of true value.

 

 

2 REPLIES 2
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Best answer

Devotee Registered Tax Practitioner

Replies 1

The SMSF is allowed to make this investment if the fact match what you have said.

 

However, unless the private company can provide audited accounts every year before your SMSF accounts are finalised,  you will have difficulty in persuading your SMSF auditor that the SMSF accounts are true and fair.

 

This is because the SMSF must revalue all investments to market value each year, and without an audit of the private company the auditor cannot rely on the private company accounts as an indicator of true value.

 

 

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Newbie

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Thank you Bruce4Tax.

 

I have confirmed it will be a Proprietary Limited with directors and shareholders and an annual audit of the financials.


Thanks again.