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Can running of "Wellbeing" business will satisfy Businesss Real Property derfintion/requirements if residential property used wholly and exclusively. Below are the facts of the case:
Members are interested in purchasing a property in their SMSF which is classed as residential.
They owns and operates a “wellbeing” business.
Could the business lease the property from the SMSF at market rent?
The idea is the members would like to run “wellbeing retreats” via the business and use the property for this purpose.
Thank you.
Hi Umesh
Yes a SMSF can purchase residential property from an unrelated party and rent it to a related party if (per section 66 of SIS):
"the real property is used wholly and exclusively in one or more businesses".
That is it is not what the property is that is important it is the usage of the property.
A common example is where a residential house is used wholly and exclusively used as a medical practice. It is business real property as it is used wholly and exclusively in the running of a business.
Guidance from an old APRA circular II.D.3 - "Acquisition of assets from related parties" explains the rule:
"On the other hand, a situation where a property is used only partly for business will not meet the "wholly and exclusively" test. For example, a doctor's residence where part of the home is set aside for medical practice, or where a mechanic works from his home garage".
Thanks
SMSF AAA