Lending to your SMSF? Look out

SMSFs that were pushing the boundaries on 0% related-party loans face big tax penalties from the ATO.

Summary: The ATO has released two rulings that will stop SMSF trustees to lend money to their SMSFs without charging the super fund any interest. This practice enabled trustees to build their balance faster in a low-tax environment. Now, loans will have to be on “arm’s length” terms, with comparable provisions to a loan from a bank.

Key take-out: SMSFs will still be able to do related party loans but they will need to use a realistic interest rate and pay back money to the lender regularly.



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