A final decision in the Full Federal Court was that the leasing of the property was not in breach of the sole purpose test and that the units held in the Burwood Sub-fund were in-house assets of the Benson Fund. SuperGuide is Australia’s leading superannuation and retirement planning website. Includes more than 500 articles, how-to guides, checklists, tips, calculators, case studies, quizzes and a monthly newsletter. Save my name, email, and website in this browser for the next time I comment. It also means that you usually cannot buy the property from – or sell the property to – someone associated with any of the Fund’s members. Please contact the developer of this form processor to improve this message. Spruikers have taken advantage of Australian’s love affair with property for years and SMSFs are as vulnerable to operators trying to leverage their desire to get into the property market (via promoting SMSFs as a means to invest in property) as anyone else. This decision impact statement suggests that the ATO views the decision as not necessarily a precedent and that each case like this will be considered on their merits. Kelly’s private use of the house is more significant than the business use, which means the property is not business real property. This is called a “Related Party” transaction. It can apply to agricultural property in some instances, even if there is a residential home on the property, if dwelling is in an area of land no more than two hectares and the main use of the whole property is not for domestic or private purposes. SMSFs can also invest in property via property trusts which can be listed or unlisted. Technically yes, but it would be difficult to find a borrower that would lend you the money to do so. “In the case the decision seems to be influenced by the fact that the student accommodation was leased firstly to arm’s length tenants at market rents and subsequently leased at market rents to a related party,” SuperConcepts executive manager, SMSF technical and private wealth, Graeme Colley, says. Via the scheme, which was introduced 1 July 2017, you can make concessional and non-concessional contributions into your superannuation to save for your first home. ( Log Out /  ETFs: How do I use them and what do they cost? You should consider whether any information on SuperGuide is appropriate to you before acting on it. The exceptions to these rules include acquiring business real property. Change ), You are commenting using your Facebook account. The downsizer scheme is more relevant to those about to retire and downsize. Learn More{{/message}}. ( Log Out /  Nevertheless, the provision by an SMSF of benefits other than those specified in subsection 62(1) that are incidental, remote or insignificant does not of itself displace an assessment that the trustee has not contravened the sole purpose test. We have offices in Castle Hill and Windsor but can meet clients anywhere in Sydney or via Skype. A trust, for this purpose, needs to be held more widely than by three inter-related parties, which was the case in Aussiegolfa. ( Log Out /  Kelly could be disqualified from being a trustee and fined. If your SMSF owns a property asset and decides to sell it, you need to remember that net capital gains are included as part of an SMSF’s assessable income. Listed property trusts (LPTs) and real estate investment trust (REITs) are listed on the Australian (or international) stock exchanges and SMSFs can invest in them as long as they comply with their investment strategy. A significant number of SMSFs do invest in direct property and statistics from Class Limited showed this to be as high as 27.1% in 2016. If SuperGuide refers to a financial product you should obtain the relevant product disclosure statement (PDS) or seek personal financial advice before making any investment decisions. This year, as you shop for that perfect stocking stuffer, you may want to add an actual stocking to your list. So you have heard you can buy an investment property with your superannuation? A ground-breaking court case last year – between the Australian Taxation Office and an SMSF party – emphasises the importance of motive when it comes to understanding the sole-purpose test. SMSF Borrowing: What Can I Do With An Investment Property Within The Rules. That requirement alone rules out residential property for the majority of funds which would have to be very large for a direct property investment to be less than 5% of total assets. Reduction in Personal borrowing capacity: With banks typically asking for personal guarantees now which then restricts your personal borrowing power. “The decision was that the original motive of the trustees was not altered by the change in tenants from arm’s length to related party. It is an illustrative example of both the application of the sole-purpose test and the in-house asset definition. People have been using their superannuation to buy property in their SMSF for decades now but it really came to the fore when SMSFs were allowed to borrow to buy assets in 2007 and when this was given more clarity in terms of borrowing to buy residential property in 2010.

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