ATO Interpretative Decision
ATO ID 2002/551 (Withdrawn)
Superannuation
Retirement income entities - bank account overdraftFOI status: may be released
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This ATO ID is withdrawn as it is superseded by paragraph 60 of SMSFR 2009/2.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Has a contravention of section 67 of the Superannuation Industry (Supervision) Act 1993 (SISA) occurred where a Self Managed Superannuation Fund's (SMSF) bank account went into overdraft during a financial year?
Decision
Yes. A contravention of section 67 of the SISA has occurred.
Facts
The trustees of an SMSF had arranged for an overdraft facility on the SMSF's bank account.
The trustees drew a cheque from the SMSF's bank account that exceeded the available balance in the account at the time.
This caused the bank account to be overdrawn and the overdraft facility to be activated.
The overdraft facility was not used for any of the exceptions provided for in section 67 of SISA.
Reasons for Decision
Under section 67 of SISA, a trustee of a regulated superannuation fund is prohibited from borrowing money or maintaining an existing borrowing of money, subject to certain exceptions. These exceptions relate to limited short-term borrowings to cover securities transactions, payment of surcharge, or the payment of benefits.
Australian Prudential Regulation Authority Superannuation Circular No. II.D.4, at paragraph 17, provides a bank overdraft, in normal circumstances, as an example of a borrowing for the purposes of section 67 of SISA.
The trustees drew a cheque that resulted in the fund's bank account going into overdraft. This created a situation that contravened section 67 of the SISA.
Date of decision: 2 April 2001
Legislative References:
Superannuation Industry (Supervision) Act 1993
Section 67
Other References:
APRA Superannuation Circular II.D.4
Keywords
Self managed superannuation funds
SMSF borrowings
SMSF breach of compliance
SMSF audit of funds
ISSN: 1445-2782
| Date: | Version: | |
| 2 April 2001 | Original statement | |
| You are here | 16 April 2010 | Archived |