SMSF trustees use fund as line of credit

smsf-trustees/trustee/ATO/australian-taxation-office/SMSFs/SMSF/administrative-appeals-tribunal/retirement/

30 September 2009
| By Lucinda Beaman |

The Australian Taxation Office (ATO) has its eyes on self-managed superannuation fund (SMSF) trustees who are using their funds as a line of credit rather than saving for their retirement.

The ATO's assistant commissioner for SMSFs, Stuart Forsyth, used a speech to a Small Independent Superannuation Funds Association audience earlier this month to warn trustees against using their funds in this way. He referred in particular to one instance in which a SMSF trustee was suffering health problems while also experiencing difficulty in their business. At one stage during this period, the trustee's fund lent 95 per cent of its assets to a related company.

The ATO was alerted to the breach by an auditor, Forsyth said. He said as the trustee made no effort to rectify the breach, the fund lost its compliant status and its concessional tax treatment.

The trustee later applied to the Administrative Appeals Tribunal (AAT) to reverse the ATO decision, but was ordered to repay the loans.

"However, the trustees made other investments instead of repaying the funds and, in fact, took four years to repay the loans," Forsyth said.

He said the behaviour of the trustees suggested they were using their SMSF as a line of credit rather than saving for their retirement.

"It has been our constant message to all SMSF trustees that they must treat their fund and any business they are involved in as being quite independent of each other. The AAT agreed with us on this issue," Forsyth said.

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