More tax free investing: use Mum and Dad's super fund

We dreamt up novel way for a 35 year old GP registrar to invest tax free this morning.
He has $400,000 to invest, is single, is still an employee, and is his proud parents only son. Mum and Dad are over age 60 and have their own self managed superannuation fund. Their son will lend or give them $400,000, they will pop it into their SMSF and buy Telstra shares (which the son reckons are a good thing) and bank the dividends and the capital growth tax free from 1 July 2007 on. The dividends will be reinvested back into Telstra shares.

Down the track, if the son needs the money back, Mum and Dad will arrange for the SMSF to sell the Telstra shares, pay out a tax free benefit and then pay it back to their son.
Provided a few ground rules are observed this will be an effective tax planning strategy. Its fairly obvious, and may be we will see some anti-avoidance type rules come into play. But at present there are no such rules and with a bit of gloss, and a binding death benefit notice in favour of the son, this should be an effective strategy.

More advanced versions of this strategy could include gearing up on deductible outgoings, to create a tax deductible interest charge at 45% tax rate, and channelling the freed up cash flow to this strategy. That's borrowing at a 45% tax rate and investing at a nil % tax rate. But care needs to be taken.