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The ruling states if it is over 50% of the shares, it will be classified as in-house asset. Here, this case it has 50% of the shares of this company not over 50%; and the total value of the investment is 21% of the SMSF asset. Can this investment be treated as in -house asset?
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Hi Rohan,
That means it is not an in house asset in this case, correct?
Thanks in advance.
Jennifer
Hi Jennifer
Yes control power is greater than 50%.
Thanks
Rohan
Hi Jennifer
Yes an in-house assets is defined in Section 71(1) of SIS as
"an asset of the fund that is a loan to, or an investment in, a related party of the fund, an investment in a related trust of the fund, or an asset of the fund subject to a lease or lease arrangement between a trustee of the fund and a related party of the fund".
An in-house asset is an investment in a private company where that entity is deemed to be majority owned or controlled. Unfortunately to determine if the private company is majority owned or controlled you need to consider the Part 8 associates rules of SIS.
That is you will need to review further to ascertain if a company that is owned 50% by the Fund would meet the definition of being a related party and then if yes any investment it it would be treated as an in-house asset.
A great reference that you should look at is:
SMSFR 2009/4 - SMSFs: definition of in-house asset.
Refer
https://www.ato.gov.au/law/view/document?DocID=SFR/SMSFR20094/NAT/ATO/00001&PiT=99991231235958
Thanks
SMSF AAA