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Dear Peers,
I have come across an Audit where the member has contributed, in specie, a car park to the SMSF. Let's say it's Car Park A.
Car Park A is in a residential building. And the SMSF already has a residential apartment with Car Park B in the same building. After receiving Car Park A, the SMSF has applied to the local council for combining The Apartment, Car Park B and Car Park A for council rating purpose. And the Council Rate Notice states that they're all residential.
Car Park A can be rented and sold separately on its own. And it's currently vacant without any tenant.
My questions would be
Is this case a sure contravention? e.g. any chance we could argue Car Park A is a Business Real Property?
If I must lodge a contravention report, is selling Car Park A the only rectification?
Many thanks for any ideas or guidance.
Hi Yunyi
Thanks. Under section 66 of SIS a SMSF cannot acquire an asset from a member unless it is:
1) listed shares, or
2) business real property (BRP), or
3) units in an ungeared unit trust (& rules followed).
Acquire means to pay for the asset or to receive it in-specie.
A Car Park would not normally be considered to be BRP so there would have been a breach of SIS that you may need to lodge an ACR for (after following the ACR instructions re the financial thresholds). A car park could be considered BRP if it was being rented out by the person who originally owned it & they owned multiple car parks & operated a business of car park rental.
Normally the rectification process would be reversing the transaction or by selling the asset.
Thanks
SMSF AAA