All investments by your SMSF must be made on a commercial ‘arm’s length’ basis. The purchase and sale price of fund assets should always reﬂect true market value, and the inacome from fund assets should always reﬂect a true market rate of return.

[video_embed video=”https://www.ato.gov.au/Super/Self-managed-super-funds/Investing/Restrictions-on-investments/” parameters=”” mp4=”” ogv=”” placeholder=”” width=”700″ height=”400″]

Generally:

you can’t buy assets from, or lend money to, fund members or other related parties (there are some exceptions to this rule)
your fund can’t borrow money.

If you don’t comply with the investment restrictions we may impose significant penalties, including disqualifying you as a trustee and even prosecution. It’s a good idea to speak to an SMSF professional to make sure your investments comply with the law.

Related parties and relatives

Several investment restrictions apply to transactions involving ‘related parties’ of your fund and ‘relatives of members’. No one associated with your fund should get a present-day benefit from its investments.

Your fund needs to be maintained for the sole purpose of providing death or retirement benefits to your members or their dependants.

A ‘related party’ of your fund includes:

all members of your fund
associates of fund members, which include
- the relatives of each member
- the business partners of each member
- any spouse or child of those business partners
- any company the member or their associates control or influence
- any trust the member or their associates control.
standard employer–sponsors, which are employers who contribute to your super fund for the benefit of a member, under an arrangement between the employer and a trustee of your fund
associates of standard employer–sponsors, which include
- business partners and companies or trusts the employer controls (either alone or with their other associates)
- companies and trusts that control the employer.

A relative of a member means any of the following:

a parent, grandparent, brother, sister, uncle, aunt, nephew, niece, lineal descendant or adopted child of the member or their spouse
a spouse of any individual specified above.