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Has a contravention of section 65 of the Superannuation Industry (Supervision) Act 1993 (SISA) occurred when the member of a self managed superannuation fund (SMSF) failed to pay rent when leasing residential property owned by the superannuation fund?

Yes, a contravention of section 65 of the SISA has occurred where a member of an SMSF failed to pay rent when leasing residential property owned by the SMSF.

The SMSF owns a residential property.

During the financial year the property was tenanted for a period of three weeks by a member of the SMSF.

Payment was made for only two weeks tenancy, the trustee not requiring payment for the third week's rent.

Subsection 65(1) of the SISA prohibits a trustee of a regulated superannuation fund from lending money of the fund or giving any other financial assistance using the resources of the fund to a member of the fund or a relative of a member of the fund.

A loan is defined in section 10 of the SISA to include 'the provision of credit or any other form of financial accommodation, whether or not enforceable or intended to be enforceable, by legal proceedings.'

The provision of free residential accommodation by the SMSF to a member constitutes the giving of financial assistance using the resources of the fund to a member of the fund. Therefore a contravention of section 65 of the SISA has occurred.

The penalty for a breach of this section is a civil penalty. Note, this could also give rise to a contravention of section 109 of the SISA for non-arms length transaction.