Four key rules when dealing with related parties

Now that we have identified who qualifies as a related party. There are four key rules to obey when dealing with related parties and your SMSF to ensure compliance and effective management of your fund.

1. Your fund needs to be maintained for the sole purpose of providing death or retirement benefits to your members or their dependants.
2. No one associated with your fund should get a present-day benefit from its investments. So no using the assets of the fund for your personal enjoyment!
3. There are several investment restrictions that apply to transactions involving ‘related parties’ of your fund and ‘relatives of members’. So you need to carefully check before you acquire any assets from a related party. There are, however no restrictions on selling investments from your SMSF to a related party – the sale just needs to be at market value and on commercial terms.
4. Any allowable dealings with related parties should always be done on an arm’s length basis and at market value.

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