smsf assets

Often we hear the ATO and our advisors reminding us to keep SMSF assets separate to our other assets. But what exactly does this mean and why is it so important?

SMSF Trustees are bound by various laws, operating standards and regulations. One of these is Regulation 4.09 (specifically 4.09A) and it doesn’t hurt to give it a read from time to time if you are a SMSF Trustee.

Firstly what do they mean by keeping the assets separate? Well this statement sounds like they are referring to the actual location of the assets and although that is not entirely incorrect there is much more to it.

When we purchase an asset, we purchase it in the capacity of an entity. Perhaps that entity is yourself, you and your spouse or maybe even your business. The asset is then held in the name of that entity for the benefit of that entity.

When purchasing SMSF assets we must purchase them in the name of the SMSF to ensure it is for the benefit of the SMSF and its members.

If I decide to setup a new bank account for my SMSF it is easy for me to forget to ensure it is in the name of the fund. I might go ahead and set it up in my personal name and then start transferring cash from the other fund bank accounts into this account. Now how can I distinguish this cash from my personal cash? This is where the problem lies.

Another trap that SMSF trustees can fall into is incorrectly completing the offer and acceptance when they are purchasing a property for the SMSF. Instead of putting the trustees “as trustee for” the SMSF on the document they may accidentally put down their personal names. This can be a very costly mistake. They will now need to transfer the asset to the correct entity which will mean double stamp duty. Nobody likes paying stamp duty once so imagine having to pay it twice!!!

So when you are purchasing assets for the fund remember Regulation 4.09A. New share purchases, property, bank accounts, term deposits, collectables and any other fund assets MUST be in the name of the super fund. Consult your advisor to ensure you get it right. Fixing it later can be a costly and time consuming task and may result in penalties.

To read Regulation 4.09A see below or contact us here if you need assistance with getting it right.

 

http://classic.austlii.edu.au/au/legis/cth/consol_reg/sir1994582/s4.09a.html

This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.