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Michael Jensen

Oct 03, 2022

Edited: Oct 03, 2022

SMSF rental property lease to ex-wife

in SMSF Technical Forum

Existing single member SMSF with corporate trustee looking to rent out residential property to ex-wife. The couple have been apart for 20 years, have 2 independent kids together aged 24 and 34.

What is everyones thoughts as to if this would be allowed?

1 answer0 replies

Comments (1)

THE AUDITORS INSTITUTE

Oct 03, 2022

Hi Michael

You need to determine if an ex spouse is a "relative" for SIS.

If an ex spouse is a "relative" for SIS then if a residential house was leased by the Fund to her it would be an "in-house" asset.

A relative is defined in SIS to include a "spouse".

My reading of SIS is that it is not clear if an ex spouse is considered to be a relative (for SIS) in relation to the in-house asset rules. You could argue that based on the below definition an ex spouse is not a relative / related party in relation to the "in-house" asset rules (assuming nothing else captures her as a related party).

SIS section 10 defines a spouse as:

""spouse" of a person includes:

(a) another person (whether of the same sex or a different sex) with whom the person is in a relationship that is registered under a law of a State or Territory prescribed for the purposes of section 2E of the Acts Interpretation Act 1901 as a kind of relationship prescribed for the purposes of that section; and

(b) another person who, although not legally married to the person, lives with the person on a genuine domestic basis in a relationship as a couple."

SIS section 17A defines a relative as including a "former spouse". This is the relative definition re the basic conditions of a SMSF rule.

My view is that if a SMSF wants to lease a residential property to an ex spouse the trustees should get legal advice as to if this is allowed (after reviewing the exact circumstances).

If other members have a view please let the forum know.

Thanks

SMSF AAA