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Jan 29, 2024

Tenants In Common

in SMSF Technical Forum

Hi,

What do people think if an SMSF buys a property 50% and there are tenants in common so there is 2/4 shares to one joint couple then my SMSF has 1/4 shares for one of the trustees and 1/4 for the other. Which would be the same as an SMSF owning 100% but having 1/2 shares for each trustee. I think this is an issue as the trustees do not hold the asset jointly and it suggests they own the shares in there sole personal name.

So appears to be a Reg 4.09A breach?

1 comment

Comments (1)

THE AUDITORS INSTITUTE

Jan 30, 2024

Hi CV

A SMSF is allowed to invest in a residential (or business real) property as tenats in common with a related party. That is a SMSF can own property jointly with a related party. The normal rules apply in that it cannot be acquired from a related party unless it is business real property.

SIS gives guidance at Section 71(1)(j) that states that an in-house asset does not include

"property owned by the superannuation fund and a related party as tenants in common, other than property subject to a lease or lease arrangement between a trustee of the fund and a related party".

The SIS legislation does not prescribe how the tenants in common property has to be held. If the property owned by the Fund is in each individual name rather than jointly held you could still argue it is held separately from any assets held personally if there is a declaration or acknowledgement of trust in place. That is arguably it is not a breach of SIS regulation 4.09A as it does not require the property to be owned jointly but it requires that it be held sepearately from any personal asset.

The rules for owning property differ state by state so legal advice should be obtained re how it should be held.

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

Thanks

The Auditors Institute