Self-managed superannuation fund (SMSF) trustees need to consider the future implications of the parameters set by lending institutions during the application process of limited recourse loans before adhering to them, according to an accounting firm specialising in the sector.
Chan and Naylor chief executive Sal Carrero said requests of this type did often not always necessarily fall within the legal obligations outlined in the Superannuation Industry Supervision Act.
He cited a recent experience one of his clients had as a classic example of the sort of danger trustees should be mindful of.
“In this situation one of the banks wanted changes to the wording of the holding trust deed. They wanted ‘as trustee for’ to be taken out,” Carrero said.
The client abided by the request, but in doing so may have complicated the situation in regard to issues like capital gains tax and stamp duty, according to Carrero.
“This creates murky water. You should be able to follow the money flow, so as long as all of the minutes, the resolutions, and the bank accounts are up to date it could be okay,” Chan and Naylor director Ken Raiss said.
“So what is needed in this case is perfect administration, simply because the primary document at the beginning left it out,” he said.
Even with extensive and up-to-date documentation, the SMSF may not necessarily be in the clear because the audit trail will still be subject to interpretation as to the true nature of the transactions and the motive behind them, Raiss explained.
He warned it puts advisers in a difficult situation as well, because in these situations an adequate plan to navigate the set of circumstances is needed or else the adviser could be held responsible.
