SMSF’s are required to invest on commercial or ‘arm’s length’ basis. That is the purchase and sales prices of fund assets should always reflect true market value and the income received by the SMSF be at market rates. SMSF’s cannot:
- Buy Assets from related parties
- Lend to or invest in a related party of the fund (included a related trust) more than 5% of the fund’s total assets.
The only exception to this rule is the transfer or purchase of business real property or listed shares and the subsequent income that it generates.