Loans issued by self managed superannuation funds (SMSFs) are attracting the attention of the Australian Taxation Office (ATO).
Statistics quoted by Townsends Business and Corporate Lawyers indicate 30 per cent of ATO audits at the moment involve loan assets held within SMSFs.
In particular the regulator has targeted SMSFs where loans issued make up 80 per cent of the funds total asset value.
The documentation associated with these loans is a specific area the ATO has identified as a potential problem.
"Quite often the loan agreement does not even exist as a signed agreement satisfying the key elements of the loan arrangement," Townsends Business and Corporate Lawyers special counsel Michael Hallinan said.
Apart from documentation issues, the risk associated with SMSF loans may need attention, he said.
"Has the trustee really understood the counter party risk it is undertaking? It's one thing to have security but it may be that the assets that you think you've got a security over may not have the value on the secondary market that you think they should have," Hallinan said.
The nature of a breach will determine what action the ATO will take against the SMSF trustees, he added.
