ATO ID 2002/516: Retirement income entities - Fund money deposited in member's bank account
Date of decision: 27 July 2001
Business line: Superannuation

Issue
Has a contravention of section 65 of the Superannuation Industry (Supervision) Act 1993 (SISA) occurred where money payable to the self managed superannuation fund (SMSF) was unintentionally deposited into the trustee's personal bank account?

Decision
No. A contravention of section 65 of SISA will have occurred if the trustee intended to borrow the money for his or her personal use.

Facts
A share broker, accustomed to receiving instructions from the trustee in both, his personal capacity, as well as in his capacity as trustee of an SMSF, inadvertently made all cheques payable to the member. The cheques were deposited into the trustee's personal bank account. The cheques were due to be paid to the SMSF and not to the trustee in his personal capacity. The trustee has on several occasions, deposited money belonging to the SMSF into his personal bank account.

Reasons for decision
Summary: Section 65 of SISA prohibits the trustee of a regulated superannuation fund from lending money to a member of the fund or a relative of a member of the fund. However paragraph 52(2)(g) of SISA places trustees under a covenant to keep the money and other assets of the superannuation fund separate to those of the trustee personally (among others). A breach of a covenant may result in an action for loss or damage that occurred as a result of the contravention.

Legislative references: Superannuation Industry (Supervision) Act 1993 Section 65 Paragraph 52(2)(g)
Subject references: Self managed superannuation funds SMSF loans SMSF trustee SIS covenants