ATO outlines common SMSF loan mistakes

Making financial assistance available to members of a self managed super fund (SMSF) was the number one most common compliance mistake for SMSF loans during 2012, according to the Australian Taxation Office’s (ATO) recently released report on the top 10 SMSF mistakes.

This type of activity accounted for 20.9 per cent of contraventions reported to the ATO. Other common mistakes included in-house assets, investments at arm’s length and acquisition of assets from related parties.

Despite the dangers that come with making costly mistakes, SMSF loans remain an ideal way for Australians to boost their retirement savings, whether through residential or commercial property investment.

The key is working with experts who specialise in SMSF loans and can provide high-quality service and advice.
Other common mistakes to avoid

While making funds available to members of an SMSF may be the most common mistake, it is far from the only way in which SMSF members can get in trouble.

Living in an investment property may seem ideal if you’re waiting for the home to appreciate in value, the ATO does not allow investment properties to be used for the owner’s residential use.

SMSF members must also keep in mind what types of renovations they are allowed to pay for with loan funds.

The ATO allows for funds to be used toward repairs, which are classified as work that restores the function of an asset but doesn’t change it.

For example, repairing a faucet so it works properly again is okay. Replacing a faucet with a fancy upgraded version counts as an improvement, and is therefore not allowed.

If you’re considering taking out an SMSF loan, contact the specialist at Redrock.