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Ishwar Shrestha

Sep 23, 2021

SMSF Investing in Floating House

in SMSF Technical Forum

Hi, Need your input,

One of SMSF trustee asking me if they can invest unencumbered(Fully Paid- no loan) purchase of Floating house in Queensland. According to Trustee it is good investment return as managing agent let the premises as holiday letting. Is SMSF allow to invest property like that, which has no title as ordinary property. It stay float in the water looks line house with full amenities of toilet bathroom kitchen you name it. https://www.domain.com.au/news/floating-apartments-launched-on-the-gold-coast-20160112-gm37e7/

1 answer0 replies

Comments (1)

THE AUDITORS INSTITUTE

Sep 26, 2021

Hi Ishwar

Yes a SMSF would be allowed to invest in an unencumbered floating house. This is on the basis that the investment complies with the SIS legislation.

The main sections / regulations of SIS that the trustee and the auditor would need to consider are:

1) Does the purchase meet the sole purpose test (Section 62 of SIS).

2) The Fund cannot purchase such an asset from a related party (Section 66 of SIS).

3) The Fund cannot rent a non business real property asset to a related party (if greater than 5% of assets) (Section 82 - 85 of SIS).

4) The investment must be made on an arm's length basis (Section 109 of SIS).

5) The investment must be in agreement with the Fund's investment strategy (Reg 4.09 of SIS).

Thanks

SMSF AAA