Wholesale investor test for SMSFs

Wholesale investor test for SMSFs

In August ASIC finally changed its position on the criteria for SMSFs to be classified as wholesale investors.  This change was long overdue and the previous confusion caused significant inconsistency.

By way of background - in 2004 ASIC released a statement saying that SMSFs needed assets of $10m (within the SMSF) to be considered wholesale investors.  Many accountants and lawyers were unaware of this statement and had therefore considered the SMSF to be a wholesale investor if its trustees had assets exceeding $2.5m or income of more than $250,000 p.a.  This had created an uneven playing field and was frustrating many industry participants. 

ASIC has now confirmed that the SMSF's status is based on the financial position of the trustees.  Nonetheless there is still further clarification required.  For example - what if one trustee meets the wholesale test but another doesn't?  And does each trustee need assets of $2.5m, or can the trustees have $2.5m in aggregate?  No doubt ASIC will clarify these points in due course.

THIS ARTICLE WAS CORRECT AT THE TIME OF WRITING. SMSF RULES CHANGE OVER TIME AND THE ARTICLE MAY BE LESS RELEVANT IN THE FUTURE.