In-House Assets
In-House Assets in SMSF: What You Need to Know
Self-Managed Super Funds (SMSF) offer flexibility and control over retirement savings. However, understanding in-house assets in SMSF is essential, as trustees must follow specific regulations to stay compliant.
What Are In-House Assets?
In-house assets are investments, loans, or leases involving related parties of the SMSF. The Superannuation Industry (Supervision) Act 1993 (SIS Act) defines them as:
Loans to, or investments in, related parties of the fund.
Investments in related trusts of the fund.
Assets subject to lease arrangements between the fund and related parties.
The SIS Act restricts SMSF from holding in-house assets exceeding 5% of the fund’s total assets. This limit is assessed at the end of each financial year; therefore, market values must be used for accuracy.
Identifying Related Parties
Related parties include:
Members of the SMSF.
Relatives of members.
Business partners and their spouses or children.
Trusts or companies controlled by members.
Therefore, understanding who qualifies as a related party is crucial to ensure compliance with in-house asset rules.
Exceptions to the Rule
Certain assets are exempt from being classified as in-house assets, including:
Business real property leased to a related party on an arm’s length basis.
Investments in non-geared unit trusts or companies that meet specific criteria.
Assets acquired before 11 August 1999 under certain conditions.
As a result, these exceptions allow SMSF to engage in specific transactions with related parties without breaching in-house asset limits.
Compliance and Consequences
If an SMSF’s in-house assets exceed the 5% threshold at the end of a financial year, trustees must:
1. Prepare a written plan to reduce the in-house asset ratio to 5% or less by the end of the following year.
2. Implement the plan within the stipulated time frame.
Otherwise, failure to comply can result in penalties, including fines and potential disqualification of trustees.
How SMSF Depot Can Help
At SMSF Depot, we specialize in providing comprehensive SMSF solutions, including:
SMSF accounting and tax return services.
SMSF audit services.
Guidance on SMSF compliance and investment strategies.
With our help, our team of SMSF specialists ensures that your fund adheres to all regulatory requirements, helping you navigate the complexities of in-house asset rules with confidence.