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PURCHASE RESIDENTIAL PROPERTY FROM MEMBER

Question from clients accountant. Member has 2 residential properties each has no of units and estimated total income for the year is $350,000.

The member wants to sell the properties to the SMSF at market value and has valuations from 3 independent valuers. Is it possible?

1 answer1 reply

2 Comments

SMSF AAA

Mar 30, 2021

Hi Shalendra

A SMSF under section 66 of SIS cannot acquire assets from a member or relative.

There is an exception for:

1) listed shares,

2) business real property (BRP), and

3) units in ungeared unit trusts (that meet the requirements).

Normally residential property owned by a member would not meet the definition of BRP so it / they would not be able to be acquired by the Fund from a member or relative.

There are certain times where residential property meets the definition of BRP. Such an example could be where the member owns multiple properties and runs a leasing business due to the size & scale.

Please refer the ATO ruling that goes into this in more detail at:

https://www.ato.gov.au/law/view/document?DocID=SFR/SMSFR20091/NAT/ATO/00001&PiT=99991231235958

Please refer example 14 in this ruling as it gives an example where a person owns multiple residential properties and it is considered whether they would meet the definition of being business real property.

Thanks

SMSF AAA