SMSF investments in unit trusts – Control issues
20th October 2015
Assume two unrelated SMSF’s want to acquire an asset of reasonable value (such as a commercial property) together via a 50/50 geared unit trust structure.
In such a situation, a key issue to consider is whether each SMSF’s investment in the unit trust is considered an in-house asset which specifically includes an investment in a related trust.
In this regard, a related trust includes a trust where the SMSF member and certain of their associates control the trust through control of the trustee.
Where a corporate trustee is involved, you should review the constitution of the company to identify whether the constitution provides that the chair of meetings has a casting vote.
Where the chair does have a casting vote, the chair should control the trustee company from time to time, and the trust should be a related trust.
And that’s not a good outcome given the relevant SMSF would be required to sell down their investment in the unit trust to get under the 5% limit for in-house assets.
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Tax Bites are general in nature and are not a substitute for specific advice. They are the opinion of Tax Advisory Specialists, and the ATO or the Courts may take a different view. They are not updated for changes in the law or the interpretation of the law since publication.