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Jan Mohammed

Sep 09, 2021

Parents live in property owned by SMSF

in SMSF Technical Forum

I have a new client where I just found out that the parents live in the rental property owned by the SMSF.

3 members of the SMSF pay market rent on behalf of their parents and I can see it coming into the bank statements regularly. The previous accountant who audited it in-house obviously looked away as I have a clean audit report. I have to breach it I guess unless someone can give me suggestions?

1 comment

Comments (1)

THE AUDITORS INSTITUTE

Sep 09, 2021

Hi Jan

Yes agreed if a SMSF rents a residential property (that is not business real property) to a member or a relative of a member it would be an In-house asset (IHA). Under sections 82 - 85 of SIS a SMSF cannot have IHA's greater than 5% of the Fund's assets.

The only exceptions to it not being a breach (if above 5%) would be if:

1) The Fund owned the residential property pre 11/8/1999 and has continuously leased the property to the relatives since this date.

2) The residential property is part of a primary production property and meets the rules re this concession.

A good reference is SMSFR 2009/1 SMSFs: business real property for the purposes of SIS.

Thanks

SMSF AAA