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A client wants to know if as a member of their own super fund, they can sell units they hold in a related property trust ( at market value) to their super fund. The fund already holds 60% of the units so buying the rest of the units from the members. However the property is a residential property, usually super fund's can't buy residential property from a member but not sure if that also applies to units in a unit trust which holds the residential property.
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Hi Kim
The answer is yes in that a Fund can acquire units in a unit trust from a member at market value if the SIS Regulation rule 13.22C is complied with.
Section 66 of SIS is the section that prohibits acquisition of certain assets from a related party but a trust that complies with SIS Regulation 13.22C is one of the exceptions that can be acquired from a related party.
An extract of the SIS Regulation 13.22C is below & this explains the rules re residential property owned by the Unit Trust (including property cannot be rented to a related party or acquired from a related party unless it is business real property).
This exception is often referred to as the ungeared unit trust exception.
SIS Regulation 13.22C extract:
"(2) For subparagraph 71(1)(j)(ii) of the Act, the asset is not an in-house asset of the superannuation fund if, when the asset is acquired:
(a) the superannuation fund has no more than 6 members; and
(b) the company, or a trustee of the unit trust, is not a party to a lease with a related party of the superannuation fund, unless the lease relates to business real property; and
(c) the company, or a trustee of the unit trust, is not a party to a lease arrangement with a related party of the superannuation fund, unless the lease arrangement:
(i) is legally binding; and
(ii) relates to business real property; and
(d) the company, or a trustee of the unit trust, is not a party to a lease, or lease arrangement, with another party in relation to an asset that is the subject of another lease or lease arrangement between any party and a related party of the superannuation fund (unless the asset is business real property); and
(e) the company, or a trustee of the unit trust, does not have outstanding borrowings; and
(f) the assets of the company or unit trust do not include:
(i) an interest in another entity; or
(ii) a loan to another entity, unless the loan is a deposit with an authorised deposit-taking institution within the meaning of the Banking Act 1959 ; or
(iii) an asset over, or in relation to, which there is a charge; or
(iv) an asset that was acquired from a related party of the superannuation fund after 11 August 1999, unless the asset was business real property acquired at market value; or
(v) an asset that had been at any time (unless it was business real property acquired by the company, or a trustee of the unit trust, at market value) an asset of a related party of the superannuation fund since the later of:
(A) the end of 11 August 1999; and
(B) the day 3 years before the day on which the fund first acquired an interest in the company or unit trust."
Thanks
SMSF AAA