Company Formations
SMSF – New Funds & Updates
Discretionary/Family Trusts
Corporate Registry
Business Names
SMSF’s and Related Trusts
Peter Johnson
The SMSF ExpertTM
Outline
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Definition of Related Trusts
Part 8 Associates
Regulation 13.22 explained
Non-arms length income
Pre-99 Unit Trusts
Auditing a Related Trust
Using Related Trusts
Definition of a Related Trust
▫ A trust where you and your part 8 associates control the trust
▫ the trustee of the trust, or a majority of the trustees of the trust, is
accustomed or under an obligation (whether formal or informal), or might
reasonably be expected, to act in accordance with the directions, instructions
or wishes of a group in relation to the entity (whether those directions,
instructions or wishes are, or might reasonably be expected to be,
communicated directly or through interposed companies, partnerships or
trusts)
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Part 8 Associates defined in Sections 70B to 70E
Control is a question of fact – not a number
51% is definitely control
So what does this mean?
Part 8 Associates
▫ Does Include:
▫ Relatives
▫ Business Partners
▫ Other members & trustee of the Fund
▫ Standard Employer Sponsor
▫ Any company or trust controlled by the person
▫ Does Not Include
▫ Co Directors
▫ Employer Sponsors
Examples
▫ Peter & Nick are partners in an accounting firm called NRM
Johnson
▫ Peter & Nick are Part 8 associates of each other
▫ Peter & Nick are co directors of a company called NRM Johnson
Pty Ltd. Their family trusts are the shareholders
▫ Peter & Nick are not Part 8 associates of each other
▫ Peter & Nick’s family trusts are partners in an accounting firm
called NRM Johnson
▫ Peter & Nick are not Part 8 associates of each other
Examples
▫ Peter & Nick are joint trustees of the Johnson Super Fund. Peter
is the sole member.
▫ Peter & Nick are Part 8 associates of each other
▫ Peter & Nick are co directors of a company called NRM Super
Fund Pty Ltd that is trustee of the Johnson Superannuation
Fund. Peter is the sole shareholder.
▫ Peter & Nick are not Part 8 associates of each other
▫ Peter & the company are Part 8 associates
▫ Nick & the company most likely aren’t
Examples
▫ Peter’s SMSF & Nick’s SMSF have 50% of the Units in a unit
trust (Peter & Nick are not Part 8 associates of each other)
▫ Peter & Nick are both directors of the trustee company
▫ The company constitution does not give a casting vote to the
chairman
▫ The Unit Trust Deed does not give a casting vote to the chairman
▫ The Unit Trust is not a related trust
▫ UNLESS Peter or Nick have effective control
Regulation 13.22
▫ An investment in a related trust that complies with
Regulation 13.22 is NOT an in house asset.
▫ Can not invest in another entity
▫ Can not run a business
▫ Not subject to a lease arrangement with a related party
▫ No borrowings or security offered
▫ Once you breach you are always an in house asset
▫ All arms-length dealings
Pre-1999 Unit Trusts
▫ Units owned pre 11 August 1999 will NEVER be an in
house asset
▫ It is the Units that are treated – not the trust
▫ Further Units also not in-house asset up to 30 June
2009
▫ Partly Paid
▫ Profits re-invested
▫ Debt election
▫ Further Borrowings 28th June 2000
▫ ATO ID’s 2012/52 & 53
Further Borrowings
28 June 2000
Pre-1999 Unit Trusts
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You need a unit register for unit history
Can still be caught with non-arms length income
Need to check these carefully!!!
Example of pre 99 trust where it causes a breach
Remember to issue new units at Market Value –
not a dollar
Auditing Related Trusts
▫ Read the Deed!!
▫ Is it valid
▫ Check for Related Trust provisions
▫ Complete check list for Reg 13.22D
▫ You need a unit register for unit history
▫ Do you need to review the trust accounts?
Using Unit Trusts
▫ Unrelated Trusts (i.e. no control) can do a lot more!!
▫ But can still be non arms length income
▫ Can still be a breach of sole purpose
▫ Financial assistance
▫ Fund can buy units off members if trusts meets Reg
13.22 even if residential property
▫ You can set up LRBA’s over the units so single
acquirable asset rules don’t need to be met for the
underlying asset
Questions