ATO Interpretative Decision

ATO ID 2002/516

Superannuation

Retirement income entities - Fund money deposited in member's bank account
FOI status: may be released
  • This document has changed over time. View its history.

Status of this decision: Decision Current
CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 65 of the Superannuation Industry (Supervision) Act 1993 (SISA) occurred where money payable to the self managed superannuation fund (SMSF) was unintentionally deposited into the trustee's personal bank account?

Decision

No. A contravention of section 65 of SISA will have occurred if the trustee intended to borrow the money for his or her personal use.

Facts

A share broker, accustomed to receiving instructions from the trustee in both, his personal capacity, as well as in his capacity as trustee of an SMSF, inadvertently made all cheques payable to the member.

The cheques were deposited into the trustee's personal bank account.

The cheques were due to be paid to the SMSF and not to the trustee in his personal capacity.

The trustee has on several occasions, deposited money belonging to the SMSF into his personal bank account.

Reasons for Decision

Section 65 of SISA prohibits the trustee of a regulated superannuation fund from lending money to a member of the fund or a relative of a member of the fund.

However paragraph 52(2)(g) of SISA places trustees under a covenant to keep the money and other assets of the superannuation fund separate to those of the trustee personally (among others). A breach of a covenant may result in an action for loss or damage that occurred as a result of the contravention.

This paragraph was inserted on 14 February 2003
Note, when a trustee becomes aware of (or should have become aware of) such an error, the trustee should immediately take steps to rectify the situation. Where the trustee fails to rectify such an error immediately on becoming aware of the error (or should have become aware of the error), they will be considered to have made a loan and have contravened section 65 of SISA.

Amendment History

Date of amendment Part Comment
14 February 2014 Reasons for Decision Updated for clarity
Legislative References Updated

Date of decision:  27 July 2001

Legislative References:
Superannuation Industry (Supervision) Act 1993
   Section 65
   Paragraph 52(2)(g)

Keywords
Self managed superannuation funds
SMSF loans
SMSF trustee
SIS covenants

Siebel/TDMS Reference Number:  CRS58901; 1-7CEXT9L

Business Line:  Superannuation

Date of publication:  31 May 2002
Date reviewed:  22 October 2015

ISSN: 1445-2782

history
  Date: Version:
  27 July 2001 Original statement
You are here 14 February 2014 Updated statement