Section 66 of the SIS Act generally prohibits an SMSF from acquiring assets from related parties. However, if what is being acquired is not an ‘asset’ at all — such as a service or a cash transfer — the rule does not apply. Where an asset is involved, nine specific exceptions may permit the acquisition. This article explains each one in plain English, with examples.
If you run a self-managed super fund, you might wonder: “Can my fund buy something from me, my family, or a company I control?” It’s a common question — and the answer is: sometimes yes, but the rules are strict and the consequences of getting it wrong can be severe.
Section 66 of the Superannuation Industry (Supervision) Act 1993 (SIS Act) generally prevents an SMSF from acquiring an asset from a related party. A “related party” includes members of the fund, their relatives, and entities they control.
A breach can result in your fund becoming non-complying — triggering tax at 45% on the fund’s assets. That makes getting this right one of the most important aspects of SMSF compliance.
Before S.66 even becomes relevant, ask: is the thing your SMSF is acquiring actually an asset? If it’s not, the prohibition simply does not apply. Your fund still needs to comply with other rules (such as the arm’s length rule in S.109 and the sole purpose test in S.62), but S.66 is out of the picture.
Two things that are not treated as assets under S.66 are:
When a related party performs a service for your SMSF, the substance of the transaction is the performance of that service — not any incidental rights acquired under the contract. The ATO confirmed this in SMSFR 2010/1. This means S.66 is not triggered, even if minor goods come along with the service.
Example: Your brother-in-law is a licensed plumber. He fixes a leaking pipe at your SMSF’s rental property and replaces a few washers as part of the job. The washers are minor and incidental to the service — the whole transaction is treated as a service, not an asset acquisition. No SIS issue.
Example: Your related-party accountant provides the SMSF with a USB drive containing its records. The substance is the accounting service — not the USB. Still fine.
Important: You Cannot Pay Yourself as Trustee for Trustee Work
S.17A prohibits an SMSF from paying a trustee (or director of a corporate trustee) for duties or services performed in their capacity as trustee. There is a narrow exception under S.17B — a trustee can be paid if they are appropriately qualified and licensed, the work falls outside their trustee role, and it is the kind of service they ordinarily provide to the public in the course of their own business. This is a high bar and must be fully satisfied.
Transferring money from a related party into your SMSF is not an asset acquisition under S.66, as long as it is genuine legal tender changing hands. Permitted methods include:
Example: Your mother wants to make a non-concessional contribution to your SMSF (within contribution caps). She transfers $10,000 directly from her bank account into the fund’s account. This is an acquisition of money, not an asset — S.66 is not triggered.
Watch Out: Collectable Coins and Barter Credits Are NOT Money
Collectable banknotes or coins — Australian or foreign — that are worth more than face value are treated as assets, not money. The same applies to trade dollars and barter credits. Acquiring any of these from a related party will contravene S.66, and may also breach the collectable investment rules in regulation 13.18AA.
Promissory notes are also a risk area. Accepting one from a member or their relative may not directly breach S.66, but if it creates an amount owing to the SMSF, S.65 (the lending prohibition) could be triggered. Always seek advice before accepting promissory notes.
Even where S.66 would normally prohibit an acquisition, nine specific exceptions exist under S.66(2), (2A) and (2B). If your transaction meets one of these, the acquisition is permitted — provided all conditions are satisfied.
Your SMSF can acquire ASX-listed shares, ETFs, or other listed securities from a related party, provided the price paid reflects market value — S.66(2)(a).
Example: You personally own 1,000 BHP shares and want to transfer them into your SMSF. Provided the transfer is made at the current market price (e.g. via an off-market transfer at the prevailing ASX price), this is a permitted related party transaction.
Your SMSF can purchase commercial property from a related party at market value, provided the property is used wholly and exclusively in a business — S.66(2)(b). This is one of the most commonly used exceptions.
Example: You own the building where your dental practice operates. You can sell that building to your SMSF at a market value confirmed by an independent valuer. The SMSF then leases it back to your practice. This is legal, widely used, and can be very tax-effective. Important: residential property — even a rental property — does not qualify as business real property and cannot be transferred from a related party.
Where two regulated superannuation funds merge, assets can be transferred across without breaching S.66 — S.66(2)(c). This is a technical exception relevant to larger fund restructuring scenarios.
The ATO can issue a legislative instrument specifically approving a category of asset for acquisition by an SMSF from a related party — S.66(2)(d). Check whether any current instruments are relevant to your situation.
Where a relationship breaks down (such as divorce or separation), assets can be transferred between related SMSFs under S.66(2B) and (2C) without breaching S.66. These transactions are typically supported by family law orders or superannuation agreements.
Example: A couple separates. Under a court-approved superannuation agreement, the wife’s SMSF transfers an investment property to the husband’s SMSF as part of the settlement. The relationship breakdown exception permits this.
Your SMSF can acquire an investment in a related party or related trust at market value, provided the fund’s total in-house assets remain below 5% of the fund’s total market value — S.66(2A)(a)(i), (b) and (c).
Example: Your SMSF buys units in a family unit trust at market value. As long as all related party investments combined stay under 5% of the fund’s total assets, this is permitted. If the 5% cap is exceeded, no new in-house asset investments can be made until the ratio drops back below the limit.
Investments that were made before 11 August 1999 and would be in-house assets under today’s rules may still be acquired at market value under the transitional rules in Subdivision D of Part 8 — S.66(2A)(a)(ii) and (b).
A life insurance policy can be acquired from a related party at market value, as long as the related party is not a member of the fund or a relative of a member — S.66(2A)(a)(iii) and (b).
Example: Your employer-sponsor (a company you control) holds a group life insurance policy. It can transfer that policy into your SMSF at market value, because the life insurance company — not a member or relative — is the policy issuer.
Investments in non-geared companies or unit trusts that satisfy the requirements of Division 13.3A of the SIS Regulations can be acquired at market value from a related party — S.66(2A)(a)(iv) and (b).
Example: Your SMSF acquires units in a non-geared unit trust that holds a commercial property. Provided the trust has no borrowings, does not lease assets to related parties (except business real property), and meets all other Division 13.3A requirements, this acquisition is permitted.
Tax Tip: The In-House Asset Rules Have More Flexibility Than Many Trustees Realise
Many trustees assume any investment connected to a related party is off-limits. In practice, there are legitimate pathways through S.66 — particularly via the in-house asset rules, the non-geared trust provisions, and the transitional rules for pre-1999 investments. A qualified SMSF specialist can help you map out what’s possible for your fund.
Related party transactions are one of the ATO’s top areas of scrutiny for SMSFs — and rightly so. The rules exist to protect retirement savings from being used for the benefit of related parties rather than fund members.
The good news is that there are real, legal pathways to transact with related parties — especially for business owners looking to hold commercial premises inside super, or to invest in family structures. The key is to plan carefully, obtain an independent valuation, and get professional advice before the transaction, not after.
If you think a related party transaction might be right for your SMSF, reach out to our team at i-accountant. We specialise in SMSF compliance and strategy, and we’re here to help you get it right.
Call us: 02 7226 9183 | Email: jit@i-accountant.com.au
Disclaimer: This article is intended for general information purposes only and does not constitute personal financial, tax, or legal advice. The information reflects Australian tax law as at the date of publication. Individual circumstances vary — please consult a registered tax agent or licensed financial adviser before acting on any information contained herein.
SMSF Related Party Transactions | Section 66 SIS Act SMSF | SMSF Acquire Asset Related Party | SMSF Accountant Penrith | Business Real Property SMSF | SMSF Compliance Specialist