SMSF Year End Strategies

June 7, 2011

During the lead up to the end of the financial year, many DIY super fund trustees are implementing new financial strategies. Because of this, there may be times when a super fund is short of cash. Unfortunately, there are only limited circumstances in which a fund can borrow to make up for this, whether from a trustee or a bank.

One scenario where a short-term loan may be allowed, arises when a fund is in trouble during the process of settling an investment purchase, such as shares. If some shares are sold and others bought, yet the cash for the first transaction has been slow in coming, then it is possible that a short term loan could be procured. The loan period should not exceed seven working days and the amount should be no more than 10 per cent of the all the assets of the fund.

Another possible scenario occurs where a trustee is required by law, or by the fund’s rules, to pay a benefit to a member or a tax liability for which the fund does not immediately have the cash. The fund can borrow so long as the period of the loan does not exceed 90 days and the total amount borrowed is no more than 10 per cent of the value of the total fund assets.

If any loan is made, it is essential that the fund take all means to ensure that money is freed up to pay off the loan.

It is a breach of super fund rules for the fund’s account to be in deficit for longer than seven days. The rules indicate that loaning money to super funds can only occur in unexpected situations. It is important to get advice if a super fund is in the red, especially as the end of year approaches.


Andrew Frith is CEO of Leenane Templeton The Self Managed Super Specialists Pty Ltd and a Financial Planner

This information is of a general nature only. It is not intended as personal advice or as investment recommendation, and does not take into account the particular investment objectives, financial situation and needs of a particular investor. Before making an investment decision you should read the product disclosure statement of any financial product referred to in this newsletter and speak with your financial planner to assess whether the advice is appropriate to your particular investment objectives. financial situation and needs. Please read our full disclaimer



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