[The Auditors Institute Ltd]

Hello Howard

Thanks for the question.

Based on the ATO’s views in SMSFR 2009/3 a UPE that is owed to the SMSF that is outstanding for more than 12-months is the provision of a loan from the SMSF back to the unit trust, and can give rise to a breach of the in-house asset rules.

Whilst a pre-August 1999 is certainly allowed to borrow, the SMSF that is the unitholder is not allowed to lend to it.

The ATO’s view in relation to this matter is not without some doubt.   Nevertheless., mindful of the official ATO view, it would seem there is an expectation of a breach to be a reported in the scenario you have described.

Best regards

The Auditors Institute