SMSF investment in Unit Trust

I am a trustee of a corporate superfund. The only member of the fund is myself.

I am currently an employee of a corporate trustee of a unit trust.

I have been offered an investment within the unit trust. It will be approximately 3% only.

I am looking to invest over 5% of my SMSF funds into the unit trust, given the investment will meet my investment strategies.

There is a possibility that I will become a director of the trustee. There are 3 other directors of the trustee, with the major sharholder/director owning approx 85% of the unit trust.

The other directors own similar 3-5% amounts.

My question here is

i) is this a related party transaction, if I become a director
ii) is this a related party transaction, if I maintain my current role as a sales manager and not become a director

Hi

As Rambler says this a very complex area and you should seek legal advice from a lawyer who has a lot of experience in this area.

In answer to your two questions I believe that in both cases it would be a related party transaction.

My understanding of the issues are;

A trustee of an SMSF you cannot invest in a related party trust where the value of in house assets is greater than 5% of the market value of the fund's total assets (section 82 of the SIS Act)

This test applies at the end of each income year using the market value of all in-house assets at that time, as well as at any time that a new in-house asset is acquired.

The unit trust that your looking to invest in would be considered a related party under the Part 8 associate definition.

PLEASE note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.

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Edited by rambler1 - 09/May/2012 at 16:33