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Edward Angyalosy

Dec 08, 2021

Transportable Accommodation Unit in an SMSF?

in SMSF Technical Forum

Can you help me with a question from a client who would like to buy an unusual asset in their SMSF.

The members want to buy transportable module accommodation in their SMSF and lease it to their accommodation business. The client has advised they are similar to ‘Ironbark Cabins’ https://www.ironbarkcabins.com.au/.

The transportable accommodation is:

completely constructed and ready to use
transportable
can be relocated and/or sold as an independent unit

The lease by the accommodation business of the unit from the SMSF would include providing piers to locate the unit on and connecting water, sewerage and electricity.

Can and SMSF do this?

Thank you for your thoughts.

1 answer0 replies

Comments (1)

THE AUDITORS INSTITUTE

Dec 08, 2021

Hi Edward

If a SMSF leases an asset to a related party it is treated as an "in-house asset". A SMSF cannot have "in-house assets that exceed 5% the Fund's total assets.

There is an exception if the asset is business real property (BRP) that is leased between the Fund and a related party.

BRP is defined in section 66(5) of SIS as:

""business real property" , in relation to an entity, means:

(a) any freehold or leasehold interest of the entity in real property; or

(b) any interest of the entity in Crown land, other than a leasehold interest, being an interest that is capable of assignment or transfer; or

(c) if another class of interest in relation to real property is prescribed by the regulations for the purposes of this paragraph--any interest belonging to that class that is held by the entity;"

My view is that the transportable module accommodation units will not meet the definition of being BRP as they are not "real property".

A great reference is SMSF 2009/1 - Self Managed Superannuation Funds: business real property for the purposes of the Superannuation Industry (Supervision) Act 1993

Thanks

SMSF AAA