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I am doing an audit of an SMSF which owns 1500 acres of rural land in Millmerran QLD. The members themselves are running a business of cattle sale, and they use their SMSF land to agist their cattle on. The cattle feed off the grass until they are ready to be sold. For this use of SMSF land, they only pay their smsf an agistment rate of $4 per head of cattle x 60 cattle per week. This is the sole agreement in place between the smsf and the related party business. Other than that, there is no lease as you would think you would expect to see if one were to lease a residential property or commercial property - where there is a 'rate per annum and cpi increase or market review annually'. The only agreement here is this agistment agreement. This this arrangement seem like it would be arms length? How would i determine if it is or not?
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Hi Mark
I do not have an issue with no lease agreement if the agistment agreement is appropriate for the arrangement between the SMSF and the related party.
My view is you would have to go to an estate agent (or farming expert) and get them to advise what a commercial agistment rate should be for that property. You would then need to compare that to the rate currently being charged.
If a SMSF rents a property to a related party the rental being charged should always be supported by a rental appraisal prepared by a suitably qualified professional.
Thanks
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