The drop in investment values has caused problems for many self-managed superannuation funds with in-house assets.
Partners Superannuation Services research has revealed 11.25 per cent of self managed superannuation funds (SMSFs) breached in-house assets limitations during 2008.
Under the Superannuation Industry Supervision (SIS) Act, an SMSF is not allowed to hold in-house assets that total more than 5 per cent of the value of the fund.
In-house assets include loans to, investments in, or the lease of equipment to businesses owned by the fund or those associated with the fund.
The rule had presented itself as a problem to SMSF trustees in the past, with 10 per cent of funds transgressing in 2007.
However, one of the main reasons for the breaches of the limit last year was the fall in investment markets.
“For example, if your fund previously had $100,000 worth of assets, a 5 per cent loan would be $5000. However, should the value fall to $50,000, $5000 would in effect translate to 10 per cent,” Partner Superannuation Services director Martin Murden said.
Despite these breaches SMSFs were improving their compliance track records, according to Murden.
“Clearly fund trustees are making a much greater effort to truly understand what is expected of them in their roles,” he said.
“They’re reading the literature which is now readily available through the Australian Tax Office and they’re attending seminars … which aim at informing and educating trustees about their rights and obligations.”
The survey was based on a sample size of over 500 SMSFs audited during 2008.
