SMSFs provide significant investment flexibility but are subjected to restrictions surrounding related party dealings and associated schemes to prevent trustee/members from using their SMSF control for their personal betterment.

There is a line that can’t be crossed yet there are still promoters who push so close to that line that they expose their clients to ATO attention which can be stressful, time consuming and expensive – particularly if the ATO determine that the line has been crossed. Typically, promoters do so whilst providing their clients with assurances that their advice is unremarkable and has been used previously by SMSFs who have passed audit and even been subject to favourable private binding rulings.

I encountered such an arrangement 6 months ago and mentioned it in a previous post.

I note, with no satisfaction, that the ATO has just included this arrangement in its list of dealings that it regards as illegal. Undoubtedly there are a number of unsuspecting SMSF trustees who are about to receive an unpleasant note from the ATO. Not a good way to kick off the new financial year.