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Roslyn Arthur

Mar 19, 2021

TRUST INVESTMENT WITH UNRELATED PARTIES.

in SMSF Technical Forum

TRUST INVESTMENT WITH UNRELATED PARTIES

As we know, Bank Interest is extremely low at present and usually a fully franked dividend may get 4%. I have a client who wants to set up a Unit Trust and use the superfund to hold units in that trust and through that lend to totally unrelated clients and charge approximately 10-15% interest. There may be another unrelated party also to invest in the trust. Would this be a legal investment for the SMSF please?

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Campbell McCart

Mar 25, 2021

I agree with the control test of greater than 50% of the unit trust then it becomes a related party. My further concern would be the security the Unit Trust would be getting from the borrower. I would fall back to the sole purpose test. Drawing a long bow, I consider there would be a breach if no real or reliable was security was provided so as to protect the members interest at the end of the day. I have seen in the past similar products (solicitors mortgage ) fail. High returns = high risk.