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Investments Disallowed


Listed below are Investments Disallowed under the ESUPERFUND Platform:


1
Private Companies and Trusts
 

Clients of ESUPERFUND are not allowed to invest in Private Companies or Private Trusts that are not listed on the ASX. The rationale for disallowing these Investments is that the underlying Company or Trust that the SMSF invests in must be "effectively audited" by ESUPERFUND to ensure that the SMSF has not indirectly breached Super Laws via these related entities. This is outside the scope of our low cost model offering.

2
Overseas Property
 

Clients of ESUPERFUND are not allowed to invest in overseas property. The rationale for disallowing overseas property investments is that overseas countries in most instances will not recognise the SMSF as the purchaser of the property. This means that the property is invariably purchased by clients in their personal names with SMSF monies. This is tantamount to a super withdrawal and using the monies to acquire the asset in the Trustees personal name. The ATO would not accept that the owner of the asset is the SMSF in this case and where the monies accessed were preserved, the Fund would be severely penalised for illegal access of super benefits. Other reasons for disallowing overseas property is the difficulty in ascertaining who is tenanting the property as well as the additional complexity in converting rent and expenses from the overseas currency to Australian currency. This added level of complexity is outside the scope of our low cost model offering.

3
Loans to any Person or Entity
 

Clients of ESUPERFUND are not allowed to lend money from their SMSF to any person or entity irrespective of whether the loan is on commercial terms. In most cases it is actually illegal to lend money from a SMSF to a Fund Member (or an associate of a Fund Member by blood or marriage) or to an entity associated with a Fund Member. Determining if the loan is within or outside the Super laws, whether the Loan is to a Fund Member or associate of a Fund member (which is complex to determine), whether loan agreements exist and if they do reviewing these loan agreements and determining if the terms are being adhered to and do not contravene Super laws is a difficult and time consuming process. This added level of complexity is outside the scope of our low cost model offering.

4
WRAP Accounts and SMAs
 

Clients of ESUPERFUND are not allowed to invest in WRAP Accounts or Separately Managed Accounts (SMAs). The rationale for disallowing these Investments is that these Accounts will typically have their own Bank and Broker. This means that we will be unable to receive share trading data and transaction data to attend to the SMSF Annual Compliance work. We understand that the WRAP or SMA Platform provides annual data however in many cases it must be checked, reconciled and inputted and this additional manual work is outside the scope of our low cost model offering.

5
Collectables and Personal Use Assets
 

Clients of ESUPERFUND are not allowed to invest in Collectables or Personal-use Assets unless the Collectables are Physical Metals purchased with our Permitted Broker. The definition of Collectables and Personal-use Assets includes jewellery, artwork, antiques, artefacts, wine or spirits, motor vehicles and motorcycles, coins and medallions etc. A full definition can be found on the ATO website here. The rationale for disallowing these Investments is that there are onerous rules accompanying investing in Collectables, including the assets cannot be stored in the private residence of the Member or an associate of the Member, must not be available for the private use or benefit of the Trustees or related parties and must be insured in the name of the SMSF within 7 days of the assets being acquired. Determining whether the asset is used by a Fund Member or associate of a Fund member (which is complex to determine), whether the SMSF complies with all the other investment rules and restrictions is a difficult and time consuming process. This added level of complexity is outside the scope of our low cost model offering.

6
Crypto-Currencies (e.g. Bitcoins)
 

Clients of ESUPERFUND are not allowed to invest in crypto-currencies (e.g. bitcoins). The rationale for disallowing digital currencies investment is that we are unable to receive trading data and transaction data to attend to the SMSF Annual Compliance work as well as the additional complexity in converting income and expenses from digital currency to Australian currency. This added level of complexity is outside the scope of our low cost model offering.

7
Carrying on a Business
 

Clients of ESUPERFUND are not allowed to carry on a business within their SMSFs. The rationale for disallowing carrying on a business is that the business in most instances may breach the Sole Purpose Test. There are also investment rules and restrictions applying to SMSFs that carry on a business, for example, the Fund’s business assets must not be available for the private use or benefit of the Trustees or related parties. If the SMSF carries on a business, it would be examined closely by the ATO. In the event of a breach, the SMSF may lose its complying status and the Trustees may face severe penalties. Determining if the business is within or outside the Super laws, whether the Fund's a business complies with investment rules and restrictions applying to SMSFs is a difficult and time consuming process. This added level of complexity is outside the scope of our low cost model offering.

8
Other Investments
 

Clients of ESUPERFUND are not allowed to invest in any Investment that is not listed as an Allowable Investment.

What happens if your SMSF invests in a Disallowed Investment?

ESUPERFUND will not be able to act for clients who invest in any asset that is not listed as an Allowable Investment. Unfortunately if you are a client of ESUPERFUND and subsequently invest in any asset that is not listed as an Allowable Investment, then ESUPERFUND reserves the right to immediately cease acting for your Fund in which case you will need to find a new accountant to act for your Fund.