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Important detail flagged with in-house asset limit
SMSF professionals have been reminded that the calculation of in-house asset limit is based on the gross value of the fund.
In an online article, SMSF Alliance practice principal David Busoli said SMSF professionals would be aware that the level of in-house assets cannot rise above 5 per cent of the fund value at any time during the year.
With some exceptions, an in-house asset is a loan or an investment to a related party of the fund, an investment in a related trust of the fund, or an asset (excluding business real property) of the fund that is leased to a related party, he explained.
“[However], what is often not appreciated is that it is the gross value,” said Mr Busoli.
“That means that a fund with a $500,000 balance generally has an in-house asset limit of $25,000 but, if it was comprised of a $1 million asset with a $500,000 loan against it, the in-house asset limit would be $50,000.”
Mr Busoli warned that if a fund breaches the in-house asset limit at any time during the year, then the law requires the fund to divest itself of the asset that caused the breach.
“For a first offence this is generally overlooked provided it is rectified before the end of the following financial year,” he said.
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.
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