SMSF – Arm’s Length

All transactions made by a self-managed superannuation fund (SMSF) must be at an arm’s length, meaning that assets should be bought and sold at market value and income on the assets should show a true market rate of return. This is important to ensure that the SMSF is not dealing with someone who is related to the fund. Breaching these rules can lead to serious consequences, and it is recommended to seek advice from an SMSF professional. Examples of breaching the rules include loaning money without interest, leasing property at half the market rate, not demanding payment on due distributions, and selling a property for less than its market value. Conducting transactions at arm’s length is crucial in protecting the retirement benefits of an SMSF.