Blog & Resources
What is the Arms Length Rule?
The objective of the arms length rule is to limit the risks inherent to a superannuation fund's assets of investing in related parties or trusts. Whilst there is no definition of 'arms length? in the SIS Act, regard should be given to the following factors:
1. Fair purchase price.
2. Whether returns of income and / or capital are akin to market expectations.
3. Whether the contract protects the interests of the SMSF and the rights and obligations are clearly defined.
4. Whether an appropriate valuation has been obtained.
An SMSF trustee must not acquire an asset from a related party of the SMSF. There are a number of exemptions, including: In house assets less than 5%; listed securities and business real property.