Cross-insurance policies in SMSFs

Tuesday 18 November 2014

The Australian Taxation Office (ATO) has provided non-binding guidance as to whether self managed superannuation funds can provide cross-insurance policies.

Cross-insurance may be used to help provide SMSFs with liquidity to pay benefits in the event of a member suffering death or permanent incapacity. These types of arrangements involve the trustee taking out an insurance policy over the life of one member for the benefit of one or more other members. It may be relevant where an SMSF holds illiquid assets, such as real property.

The ATO's view is that, from 1 July 2014, new insurance policies under these types of arrangements are not permitted within SMSFs as they are not consistent with a condition of release in respect of the member receiving the benefit.

Further information

ATO, Can an SMSF take out insurance on a cross-insurance basis? 17 November 2014

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