SMSF adviser logo
subscribe to our newsletter

‘Concerning’ loan arrangements surfacing, technical expert warns

david busoli ad
By Legal
11 November 2022 — 1 minute read

SMSF professionals need to be very cautious of SMSF investments where the terms of the arrangement suggest there is likely to be a related party involved, says a technical expert.

In a recent online article, SMSF Alliance principal David Busoli said he has seen some instances recently of trustees entering concerning arrangements involving loans to companies.

To continue reading the rest of this article, create a free account
Already have an account? Sign in

Mr Busoli gave a recent example of a trustee who was considering lending most of their assets to an unrelated company.


“This loan was to be unsecured except to the extent of a personal guarantee. The increased risk was to be reflected in the interest rate,” he explained.

Mr Busoli noted that SIS does not prevent a trustee from entering into such an arrangement provided it has been adequately considered in the fund’s investment strategy.

“In short, SIS does not prevent a trustee from making what is likely to be a lousy investment, if they believe it is a good idea at the time,” he said.

However, the unrelated company then intended to purchase shares in another company to acquire property and a business asset.

“The fund member would become a director of the second company and hold a 40 per cent equity position. This is a clear breach of the sole purpose test,” warned Mr Busoli.

Arrangements such as these, he said, have created the need for SMSF auditors to pay careful attention to investments in related parties or in this case, investments that seem to be unlikely to unrelated parties.

“Concerningly, there seemed to be outside parties with vested interests advising the trustee on this matter. Quite apart from the clear ethical and professional issues involved, such parties need to consider that if the fund breaches SIS and suffers a loss, any party involved in the advice is liable for that loss,” said Mr Busoli.



‘Concerning’ loan arrangements surfacing, technical expert warns
david busoli ad
smsfadviser logo
Miranda Brownlee

Miranda Brownlee

Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.

Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.

You can email Miranda on: [email protected]momentummedia.com.au
You need to be a member to post comments. Register for free today


Get the latest news and opinions delivered to your inbox each morning

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.