[The Auditors Institute Ltd]

Hello Yu-Wei

Thanks for an interesting question.

Section 66 – acquisition of assets from a fund member or their related parties

If the fund acquired the barter dollars from a third party that was not:

• a member of the fund,
• a Part 8 associate of a member of the fund, or
• a standard employer-sponsor (or a Part 8 associate of a standard employer-sponsor),

then there would not be any section 66 matters.

However, if the fund member personally owned the barter dollars, and made an in specie contribution, this would constitute the acquisition of an asset from a related party.  This would be prohibited by section 66.

Similarly, if the barter dollars were purchased from a fund member (rather than contributed in specie), or from a related party that is a Part 8 associate, this would also be prohibited by section 66.

Section 62 – sole purpose test 

I suspect the risk of there being a sole purpose test concern is heightened where the supplier of the barter dollars to the fund was the fund member or a Part 8 associate of the fund member.  The reason why I say this, is that the concern is that the fund was acting as a buyer of last resort of the barter dollars.

For example, if a relative of a fund member had barter dollars that were “worth” $50,000, but could not readily dispose of this asset to an arm’s length party, but the related party SMSF then acquired the asset for $50,000, in this hypothetical scenario, this would suggest the acquisition of the asset was motivated by something other than providing for benefits in the fund member’s retirement.

At a practical level, I suspect that an arm’s length vendor of real estate would not accept barter dollars upon settlement.  What would need to occur is that the fund would have to sell the barter dollars on the market for currency, and then take the proceeds to assist with settlement on the real estate.

Would be happy to hear the thoughts of fund auditors on this matter.

Best regards

The Auditors Institute