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Pardeep KUMAR

Apr 09, 2024

S82-85 breach

in SMSF Technical Forum

I am auditing a SMSF for 2023 year. The superfund has residential property. Which is leased to themselves at market value rent. The market value of the property as on 30 June 2023 was $650,000. The superfund purchased this property in 2017 and rented to themselves since from 2017. Now they have put the property in the market to rent to third party.

I think this is a breach of s82-85 - In house asset and s62 - sole purpose test.

Any other breach? Should i report the breach from 2017?

Please advice

4 comments

Comments (4)

THE AUDITORS INSTITUTE

Apr 10, 2024

Hi Pardeep

Yes renting of residential property that was acquired in 2017 to a member is an in-house asset so if in excess of 5% of Fund assets there is a breach of section 82-85 of SIS.

Yes arguably there is also a breach of section 62 of SIS the sole purpose test.

The auditor contravention report is re the 2023 financial year of audit and in the events section you would advise the start date of the breach as being in 2017 and that the event started before the audit period.

Thanks

The Auditors Institute

Pardeep KUMAR

Apr 11, 2024

Replying to

Thanks a lot

Pardeep KUMAR

Apr 11, 2024

Replying to

Thank you,

Further to the abvoe breach. The trustees wants to rectify this. Male member is 67 year old and female member is turing 60 in couple of months. She is not working and do not have any willingness to work in future. They are planning to transfer the property to themselves as benefit paid in specie.

I think this will rectify the breach.

Pleae advise.

THE AUDITORS INSTITUTE

Apr 11, 2024

Replying to

Hi Pardeep

The breach is rectified by the property no longer being rented to the members.

If they have met a condition of release and they transfer the property in specie this will rectify the breach as it will no longer be rented to the members.

Thanks

The Auditors Institute