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Jean Rey

Jun 07, 2022

Tenants in common

in SMSF Technical Forum

Hi SMSFAAA team,

A property was purchased by an SMSF and the sole member of the fund (70% & 30% respectively). The property is NOT leased to a related party, lease agreement was lodged with RTA & rental statement from real estate provided.

The rent is received by a bank account (not recorded in SMSF) under corporate trustee ATF SMSF & the member. The bank statements and all expenses invoices have been received. No transfer has been made to the SMSF but the rent has been recorded as receivable in the SMSF's balance sheet.

The previous auditors mentioned about the property asset owned as a tenant in common interest and asked to provide the bank statements, real estate agent rental income support and a sample of property expense notices which has been done as outlined above.I don't think there is any contraventions but I never faced such situation. Please advise if you think otherwise?

Can you please advise what you would outline (if anything) in the Management Letter?

Thank you in advance.

Yours Sincerely

Jean Rey

1 answer0 replies

Comments (1)

THE AUDITORS INSTITUTE

Jun 09, 2022

Hi Jean Ray

The normal accounting approach I see in this situation is the Fund takes up its % percentage share of the joint bank account as an asset in the Fund's accounts. Further the rent & the expenses through that joint bank account are allocated to the Fund based on its % ownership of the property. I would expect that over time (preferably at least annually) there should be a payment of the net rent from the joint bank account to the Fund's bank account.

I do not believe there is a contravention based on what you have outlined but as I noted above in the management letter I would recommend a regular transfer of the Fund's share of the net rent from the joint bank account to the Fund's bank account.

Thanks

SMSF AAA