Can my SMSF lend me money?
The short answer is no. Your Self Managed Super Fund (SMSF) cannot lend money to you or any of your relatives; the SIS Act, in Section 65, states that superannuation funds (including SMSF’s) are not permitted to provide financial assistance to members or their relatives.
There is an administrative penalty of 60 units ($12,600 per trustee) if this provision is breached, as well as disqualification from being a trustee of an SMSF and/or civil and criminal penalties.
Can my SMSF loan money to my business?
Generally, no, this is also prohibited and can also attract administrative fines of 60 units ($210 per unit = $12,600). There are however some exceptions to this, with strict conditions, and they must be correctly put in place. These strict conditions are:
- The loan is made to a company or a trust with a corporate trustee (not to a sole trader business or partnership)
- The amount of the loan is less than 5% of total fund assets (based on market value)
- The loan is on arms-length commercial terms
- The loan is allowable under the trust deed of the SMSF and is included as part of the investment strategy of the SMSF
- The loan does not breach the sole purpose test
This might seem fairly straightforward, but there are further complications related to the market value of assets now and into the future, and how this can affect the amount you borrow (ie. Keeping to the less that 5% condition).
If you would like to discuss how you can borrow money from your SMSF, please contact Greenhalgh Pickard today. Our experienced and knowledgeable accounts team can provide advice and guidance, based on your individual circumstances.