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Jean Rey

Mar 24, 2022

Residential property used for business

in SMSF Technical Forum

Hi SMSFAAA,

Can you please advise if a member can rent a residential property from their SMSF if the use of the property is 100% business and he lives elsewhere.

The house is zoned residential and it is a residential house. However the local council allow all houses on that main street to trade as a commercial basis.

Can you please advise by referring to the SISA?

Thank you in advance.

Kind Regards

Jean Rey

2 answers0 replies

Comments (2)

Jean Rey

Mar 24, 2022

Thank you very much for your reply and details provided.

I really appreciate. 🙂

THE AUDITORS INSTITUTE

Mar 24, 2022

Hi Jean

The answer is yes in that a SMSF can rent a residential house to a member if the property is used 100% in a business.

Section 66 defines business real property as real property that "is used wholly and exclusively in one or more businesses".

Section 71 of SIS states that an in-house asset does not include a lease arrangement between a Fund and a related party if the property is business real property.

The ATO has a great ruling on this topic with examples.

Refer:

"SMSFR 2009/1

Self Managed Superannuation Funds: business real property for the purposes of the Superannuation Industry (Supervision) Act 1993"

"Example 21: Doctor's surgery in residential premises

302. Dr Mary owns a house used exclusively by her medical practice.

303. Dr Mary is a member of the Yianni SMSF. Dr Mary, in her capacity as trustee of the SMSF, wants to acquire the house for market value and then lease it back so the medical practice can continue to operate from the house.

304. Although the house was built to be residential premises, it is not used as such. The real property is used wholly and exclusively in Dr Mary's medical practice business. For the purposes of the related party asset acquisition rule in section 66, the property is business real property of Dr Mary. Once acquired by the Yianni SMSF, it is also business real property of the fund and is therefore not an in-house asset of the SMSF."

Please refer to the ruling for the above and other examples.

Thanks

SMSF AAA