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Tim Meehan

Jul 27, 2022

in SMSF Technical Forum

In have been asked to comment on the following:-

A clients SF has the opportunity to acquire a 1/6 interest in a private company that is being established to acquire a property (land) and develop this into residential blocks.

The land is owned by her father and will be sold to the new company at a commercial rate.

The client will not be a director of the company but a 1/6 share holder.

The client's brother in law

There will be no gearing in the company.

These are the main points to this situation. I would appreciate a considered opinion on this.

Thanks

Tim Meehan CA

1 answer0 replies

Comments (1)

THE AUDITORS INSTITUTE

Jul 29, 2022

Hi Tim

I assume the company that the Fund invests in is not considered a related party and therefore is not an in-house asset.

If the land is considered "business real property" eg land held by a business developer then the company can purchase the land from the Super Fund member's father at market value.

If the land is not "business real property" then the member of the Fund needs to ensure that this is not a "scheme" (per section 66(3) of SIS) to get around the purchase of asset rules from a related party.

As the company is not a related party my view is that it should be able to normally purchase the land from the member's father subject to considering the scheme requirements.

To provide certainty an option would be to get a private ruling from the ATO or get a superannuation lawyer to provide a written response once they have considered all the relationships and facts.

If other members have a view on this question please advise.