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Assessment Activity 4
Activity instructions to candidates
- This is an open book assessment activity.
- You are required to read this assessment and answer all 6 questions that follow.
- Please type your answers in the spaces provided.
- Please ensure you have read “Important assessment information” at the front of this assessment
- Estimated time for completion of this assessment activity: 1-2 hours
How many members can aSelf Managed Superannuation Fund (SMSF) have?
Your client, Jane, has an existing balance of $500,000 in a retail superannuation fund and is considering establishing an SMSF where she will be the only member of the fund.
What options does Jane have in terms of who can be the trustees of her SMSF?
Susan has an SMSF with a total fund value of $800,000. She owns her own home which is valued at $425,000 and also owns a beach house worth $310,000 which she only uses during the very warm months of summer. Susan wants her SMSF to purchase the beach house. Is Susan’s SMSF permitted to purchase the beach house from Susan? Explain why/or why not?
Your clients, Sam and TerryBanks, have an SMSF and have just purchased a residential property at auction, using the cash that they had in their SMSF. The property will make up about 95% of the total assets of the fund. They are both in pension phase and ask you whether there are any issues they should know about.
a) Explain two risks of having one asset comprising such a big portion of the fund.
b) Sam heard a friend talk about the “sole purpose test”. Explain to him what that test means.
c) What happens if the residential property couldn’t be tenanted for a significant period of time? Could your client move into it and pay rent to themselves? Explain.
d) Explain the In-house asset rule? What percentage of In-house assets could your client have within their fund?
e) Would your answer to question (c) above differ if the property was business real property and your client leased the property for their own business? Explain.