Question of the Week

Questions of the Week

Co-founder of the Switzer Report
Print This Post A A A

Question 1: Just back from another excellent Switzer Investor Conference. I have a question as to what assets an SMSF can invest in. I am considering establishing a small trust to invest in direct property. Is our SMSF eligible to be an investor in the Trust if my husband and I are also individual members? If all records are kept correctly, would this present a problem re the related party rules? And am I right in thinking all trust income and capital gains need to be distributed in line with proportional membership?

Answer: If your SMSF invests in a related party investment trust, it will most likely be deemed an “in-house” asset. While this is allowed, you can’t have more than 5% of the SMSF’s assets invested in “in-house” assets. You should read the ATO’s ruling on this (SMSFR 2009/4) – here is the link Distributions of income and capital would normally be made in accordance with proportionate shares. Your accountant can advise you further on this.

Question 2: I would be severely impacted by the changes to franking credits under a Labor government. My wife and I are both in pension phase and are considering winding up our SMSF to join an industry fund to take advantage of franking credits. Do you have any recommendation as to which Industry Super is best?

Also from this edition