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Feb 17, 2023

Edited: Feb 17, 2023

NALI Provisions

in SMSF Technical Forum

I have SMSF where in less than a year of property purchase ($350k) and sale took place, Capital Gain of over one million was made. All purchase and sale contracts, settlement statements are prepared in usual way. I have obtained a Trustee declaration that property was not purchased or sold to related party and there is no indication of it either. But the whole scenario doesn't seem right.

There is another property in the SMSF purchased in same financial year with similar gain, but not sold yet !

I have read various NALI special income provisions, TR 2006/7, LCR 2021/2 and PCG 2020/5 but can’t find nexus to call this NALI.

I like to understand what other auditors will do in this scenario please ?

1 answer0 replies

Comments (1)

THE AUDITORS INSTITUTE

Feb 20, 2023

Hi SP

Section 109 of SIS requires that an investment must be made on an arm's length basis.

Section 62 of SIS is the sole purpose requirement.

My view is you need to obtain enough evidence that the purchase and sale of the properties have been done on an arm's length basis.

As a starting point I would request an explanation as to how a property can be purchased for $350,000 and a capital gain of over $1,000,000 can be made in less than a year.

Thanks

SMSF AAA