Description
An organiser sets up a trust ('the trust') which purports to offer fixed rate interest yielding investments to allegedly unrelated entities. 2. An SMSF invests in the trust. 3. The organiser (who may also be the trustee of the trust) or a licensee/franchisee of the organiser, sources borrowers ('the borrowers') to borrow funds from the trust. 4. The borrowers may include a member of the SMSF that invested in the trust or a relative of an SMSF member. 5. Each borrower enters into a loan agreement ('the loan') with the trust. The loan amount (or total loan amounts of all borrowers associated with the SMSF) may be comparable to the amount the SMSF invested in the trust. 6. Terms of the loan may include: a. a range of available interest rates; b. a range of interest payment terms, including flexibility in the repayment date (provided the funds are paid sometime in the future); c. security over the loan in the form of a mortgage, personal guarantee or caveat; and/or d. the use of borrowed funds for multiple purposes, including business, investment or personal use. 7. Each borrower makes interest only repayments on the loan to the trust for a substantial period of the loan. 8. The trustee of the trust pays the SMSF an interest yield on their purported investment. 9. Investment and loan fees payable under the arrangement may be considered excessive.