Issue
Has a contravention of section 67 of the Superannuation Industry (Supervision) Act 1993 (SISA) occurred where a Self Managed Superannuation Fund's (SMSF) bank account went into overdraft during a financial year?
Decision
Yes. A contravention of section 67 of the SISA has occurred.
Facts
The trustees of an SMSF had arranged for an overdraft facility on the SMSF's bank account.
The trustees drew a cheque from the SMSF's bank account that exceeded the available balance in the account at the time.
This caused the bank account to be overdrawn and the overdraft facility to be activated.
The overdraft facility was not used for any of the exceptions provided for in section 67 of SISA.
Reasons for Decision
Under section 67 of SISA, a trustee of a regulated superannuation fund is prohibited from borrowing money or maintaining an existing borrowing of money, subject to certain exceptions. These exceptions relate to limited short-term borrowings to cover securities transactions, payment of surcharge, or the payment of benefits.
Australian Prudential Regulation Authority Superannuation Circular No. II.D.4, at paragraph 17, provides a bank overdraft, in normal circumstances, as an example of a borrowing for the purposes of section 67 of SISA.
The trustees drew a cheque that resulted in the fund's bank account going into overdraft. This created a situation that contravened section 67 of the SISA.