Hi Umesh

Firstly I assume the Fund did not acquire the property from a related party.

Under SIS the trustees can rent real property (or part of) to a related party if the property is business real property. BRP is defined in section 66 of SIS as:

"business real property, in relation to an entity, means:

                     (a)  any freehold or leasehold interest of the entity in real property; or

                     (b)  any interest of the entity in Crown land, other than a leasehold interest, being an interest that is capable of assignment or transfer; or

                     (c)  if another class of interest in relation to real property is prescribed by the regulations for the purposes of this paragraph—any interest belonging to that class that is held by the entity;

where the real property is used wholly and exclusively in one or more businesses (whether carried on by the entity or not), but does not include any interest held in the capacity of beneficiary of a trust estate."

My reading of the above is that if the property is used not wholly and exclusively in the running of a business or businesses now it does not meet the definition of being BRP & would be treated as an in-house asset in your example. That is it is the usage of the propertry now not when acquired which is the issue. I again assume property not acquired from a related party.

It would be great to get other forum members views re this as it seems an unfair outcome. You could raise it with a Superannuation lawyer or the ATO to get their view.

Thanks

The Auditors Institute