The Australian Taxation Office has issued a warning to trustees of self-managed superannuation funds about prohibited lending activity. The ATO said SMSF trustees cannot lend money or provide other forms of financial assistance to a fund member or a relative of a fund member. And a trustee cannot lend money to a related party, such as a business, where the value of the loan exceeds 5 per cent of the fund’s assets. These are longstanding restrictions but the ATO said lending to members has been the most commonly occurring contravention in SMSF auditor contravention reports in recent years. Such loans made up 16 per cent of all reported breaches for the 2019 to 2022 audit years. The ATO said that if a related-party loan exceeds 5 per cent of the value of the fund’s assets at the end of the financial year, the trustee must prepare a plan to reduce the value of the loan to less than 5 per cent. A loan to a member “must be rectified as soon as possible by ensuring the loan is repaid” and if it can’t be rectified, the trustee should disclose it to the ATO. The ATO can impose fines of around A$20,000 for breaches and disqualify trustees.