When a Self-Managed Super Fund (SMSF) lends money to members or their related parties, the loan constitutes as an in-house asset of the fund. However, it is not necessary that the fund has contravened Section 65 of the SIS legislation. The Australian Taxation Office (ATO) has provided an insight in SMSFR 2008/1 stating more factors need to be considered.

The flowchart below explains the workings of the SIS legislation.

Please click on image below to view larger version.

SMSF lends money diagram