{"id":5465,"date":"2021-02-16T12:51:50","date_gmt":"2021-02-16T01:51:50","guid":{"rendered":"https:\/\/mnygroup.wpengine.com\/?p=5465"},"modified":"2025-02-01T18:47:56","modified_gmt":"2025-02-01T07:47:56","slug":"using-smsf-to-acquire-aseets","status":"publish","type":"post","link":"https:\/\/mnygroup.com.au\/en\/using-smsf-to-acquire-aseets\/","title":{"rendered":"Using SMSF to Acquire Assets from A Related Party"},"content":{"rendered":"<p><span style=\"color: #000000; font-size: 14.4px;\"><nav aria-label=\"breadcrumbs\" class=\"rank-math-breadcrumb\"><p><span class=\"last\">Home<\/span><\/p><\/nav><\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-large wp-image-5468 aligncenter\" src=\"https:\/\/mnygroup.com.au\/wp-content\/uploads\/2021\/02\/Using-SMSF-to-Acquire-Aseets-from-A-Related-Party-1024x681.jpg\" alt=\"Using SMSF to Acquire Assets from A Related Party\" width=\"1020\" height=\"678\" srcset=\"https:\/\/mnygroup.com.au\/wp-content\/uploads\/2021\/02\/Using-SMSF-to-Acquire-Aseets-from-A-Related-Party-1024x681.jpg 1024w, https:\/\/mnygroup.com.au\/wp-content\/uploads\/2021\/02\/Using-SMSF-to-Acquire-Aseets-from-A-Related-Party-300x200.jpg 300w, https:\/\/mnygroup.com.au\/wp-content\/uploads\/2021\/02\/Using-SMSF-to-Acquire-Aseets-from-A-Related-Party-768x511.jpg 768w, https:\/\/mnygroup.com.au\/wp-content\/uploads\/2021\/02\/Using-SMSF-to-Acquire-Aseets-from-A-Related-Party-391x260.jpg 391w, https:\/\/mnygroup.com.au\/wp-content\/uploads\/2021\/02\/Using-SMSF-to-Acquire-Aseets-from-A-Related-Party-1536x1022.jpg 1536w, https:\/\/mnygroup.com.au\/wp-content\/uploads\/2021\/02\/Using-SMSF-to-Acquire-Aseets-from-A-Related-Party.jpg 1920w\" sizes=\"auto, (max-width: 1020px) 100vw, 1020px\" \/><\/p>\n<h2>\u00a0<\/h2>\n<h2><span style=\"color: #000000;\"><strong>Can SMSF acquires residential property from related party?<\/strong><\/span><\/h2>\n<p><span style=\"color: #000000;\">Under the legislation of SUPERANNUATION INDUSTRY (SUPERVISION) ACT 1993, the trustee of a self-managed superannuation fund (SMSF) is not allowed from intentionally acquiring <strong>residential property<\/strong> from a <strong>related party<\/strong> of the fund, unless it is acquiring a <strong>business real property<\/strong>.<\/span><\/p>\n<p>\u00a0<\/p>\n<h2><span style=\"color: #000000;\"><strong>How to define a business real property?<\/strong><\/span><\/h2>\n<p><span style=\"color: #000000;\">As per ATO guidance \u2013 SMSFR 2009\/1, property that is considered \u2018Business Real Property\u2019 can be acquired from a related party.<\/span><\/p>\n<p><span style=\"color: #000000;\">Business real property must:<\/span><\/p>\n<ul>\n<li><span style=\"color: #000000;\"><strong>Be real property<\/strong><\/span>\n<ul>\n<li><span style=\"color: #000000;\">Any freehold or leasehold interest.<\/span><\/li>\n<li><span style=\"color: #000000;\">Any interest of the entity in Crown land, other than a leasehold interest, being an interest that is capable of assignment or transfer.<\/span><\/li>\n<li><span style=\"color: #000000;\">A demountable placed on land would not qualify as it is not real property in its own right.<\/span>\n<ul>\n<li><span style=\"color: #000000;\">If a structure is not a permanent part of the land, it is not real property in the true sense.<\/span><\/li>\n<\/ul>\n<\/li>\n<li><span style=\"color: #000000;\">Does not include items such as plant, machinery, motor vehicles, etc.<\/span><\/li>\n<\/ul>\n<\/li>\n<li><span style=\"color: #000000;\"><strong>Satisfy the \u201cbusiness use test\u201d<\/strong><\/span>\n<ul>\n<li><span style=\"color: #000000;\">Wholly and exclusively used in one or more businesses to the exclusion of other types of use.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p style=\"padding-left: 80px;\"><span style=\"color: #000000;\">The term \u201cwholly and exclusively\u201d means:<\/span><\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li><span style=\"color: #000000;\">Used to an appreciable degree.<\/span><\/li>\n<li><span style=\"color: #000000;\">Minor part of property may not be used at all.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li><span style=\"color: #000000;\">There are a <strong>few exceptions<\/strong> where a residential portion of the property is required for the business to sufficiently run, therefore, the property will still be considered business real property.<\/span><\/li>\n<\/ul>\n<p style=\"padding-left: 40px;\"><span style=\"color: #000000;\">Examples:<\/span><\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li><span style=\"color: #000000;\">Motels, Boarding houses &amp; B&amp;B.<\/span><\/li>\n<li><span style=\"color: #000000;\">Farms With up to 2 hectares of residential land.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>\u00a0<\/p>\n<h2><span style=\"color: #000000;\"><strong>Who is related party?<\/strong><\/span><\/h2>\n<p><span style=\"color: #000000;\">The definition of a \u201crelated party\u201d is not restricted to individuals; it is in fact, much more far-reaching than that. Section 10 of the SIS Act specifies a related party to be any of the following:<\/span><\/p>\n<ul>\n<li><span style=\"color: #000000;\">A member of the fund<\/span><\/li>\n<li><span style=\"color: #000000;\">A standard employer-sponsor of the fund<\/span><\/li>\n<li><span style=\"color: #000000;\">A Part 8 associate of an entity referred to in either of the above<\/span><\/li>\n<\/ul>\n<p><span style=\"color: #000000;\">Many clients may not have doubts in regards to a member or a standard employer-sponsor of the fund, except part 8 associate of an individual. A part 8 associate of a member is of the following:<\/span><\/p>\n<ol>\n<li><span style=\"color: #000000;\">A relative including but not limited to children, spouse, parents and lineal descendant;<\/span><\/li>\n<li><span style=\"color: #000000;\">Other members of the SMSF;<\/span><\/li>\n<li><span style=\"color: #000000;\">For a single member SMSF, any other trustee, or director of a corporate trustee;<\/span><\/li>\n<li><span style=\"color: #000000;\">A business partner to the SMSF<\/span><\/li>\n<li><span style=\"color: #000000;\">Spouse or child of the business partner<\/span><\/li>\n<li><span style=\"color: #000000;\">A trustee of trust where the member controls the trust<\/span><\/li>\n<li><span style=\"color: #000000;\">A company with major voting interest is held by the member or any other Part 8 associate of the member.<\/span><\/li>\n<\/ol>\n<p><span style=\"color: #000000;\"><strong>\u00a0<\/strong><\/span><\/p>\n<h2><span style=\"color: #000000;\"><strong>Can residential property be defined as Business Real Property?<\/strong><\/span><\/h2>\n<p><span style=\"color: #000000;\">In short answer, yes, but it is in limited circumstances as referred to the following example.<\/span><\/p>\n<p><span style=\"color: #000000;\">Mr Wood owns 20 residential units that are leased to long-term residents. Mr Wood manages and maintains the flats on a full-time basis living on the income generated from the leases. The units are not mortgaged. Mr Wood would like his SMSF to acquire some of the units rather than sell the units to a non-related party. The scale of the operation together with the elements of repetition and purpose indicate that Mr Wood is carrying on a <strong>property investment business<\/strong>. Even though the tenants use the properties for their own private or domestic purposes, this use remains incidental and relevant to Mr Wood&#8217;s property investment business. Consequently, Mr Wood&#8217;s interest in the property on which the units are built is business real property. Provided the acquisition takes place at market value, the units may be acquired by the SMSF without contravening the related party asset acquisition rule in section 66 SIS Act 1993.<\/span><\/p>\n<p><span style=\"color: #000000;\"><strong>\u00a0<\/strong><\/span><\/p>\n<h2><span style=\"color: #000000;\"><strong>Key Take Away<\/strong><\/span><\/h2>\n<p><span style=\"color: #000000;\">A business real property is a real property that is actively used in a business. Receiving rental income from an investment property is likely a form of receiving passive income. However, Mr Wood\u2019s business scale is a vital factor to prove that he is carrying on a business.<\/span><\/p>\n<p><span style=\"color: #000000;\">In addition, SMSF is a special investment vehicle and is not supposed to carry on a business, it is important to consult SMSF specialists before you make investment decisions.<\/span><\/p>\n<p><span style=\"color: #000000;\">For any technical questions, or to find out about how our services can support your investment, please contact our team.<\/span><\/p>\n<p>\u00a0<\/p>\n<p><span style=\"color: #000000;\"><strong>ATO Guidance:<\/strong><\/span><\/p>\n<p><span style=\"color: #000000;\">SMSFR 2009\/1: <a href=\"https:\/\/www.ato.gov.au\/law\/view\/document?DocID=SFR\/SMSFR20091\/NAT\/ATO\/00001&amp;PiT=99991231235958\" target=\"_blank\" rel=\"noopener\"><em>Self Managed Superannuation Funds Ruling<\/em><\/a><\/span><\/p>\n<p><span style=\"color: #000000;\">SMSFR 2010\/1:<a href=\"https:\/\/www.ato.gov.au\/law\/view\/document?DocID=SFR\/SMSFR20101\/NAT\/ATO\/00001\" target=\"_blank\" rel=\"noopener\"><em> Self Managed Superannuation Funds Ruling<\/em><\/a><\/span><\/p>\n<p>\u00a0<\/p>\n<p style=\"text-align: center;\"><strong><a href=\"https:\/\/mnygroup.com.au\/\">www.mnygroup.com<\/a><\/strong><\/p>\n<p><span style=\"color: #999999;\"><em>This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.<\/em><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"","protected":false},"author":1,"featured_media":5468,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1689],"tags":[1465,1412],"class_list":["post-5465","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-accounting-advice","tag-property","tag-smsf","masonry-post","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-20"],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/posts\/5465","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/comments?post=5465"}],"version-history":[{"count":0,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/posts\/5465\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/media\/5468"}],"wp:attachment":[{"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/media?parent=5465"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/categories?post=5465"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/tags?post=5465"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}