Caution: Implications Of Short Term Related Party Loans For SMSFs
Previously when Advisers Digest director, Peter Johnson was providing LRBA documents, he was astounded at the high number of potentially disastrous related party loans attempting to be set up.
Consistently accountants were saying that they thought their special circumstance was OK.
One accountant was about to lend 100% to his fund to acquire his office. He has seen loans to borrow the GST, to pay the deposit and top up the first lender. Also a lot of attempts to lend for the purpose of acquiring units in a Reg 13.22 trust.
Often the argument provided was that it is commercial to lend on unsecured terms as lots of banks do that. Correct, but not on a limited recourse basis.
Just be very careful about related party borrowings because if you get it wrong it stays with the fund until the asset is sold so the risks are way higher.
