CGT for Selling a Depreciated SMSF Asset

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(Newbie)Newbie

15 Aug 2024

My SMSF purchased a mountable building, which we have been leasing out as a holiday cabin to non-related parties for rental income.

The ATO has informed us that this building breaches the in-house asset rule and needs to be disposed of.

The purchase price of the building was $41,164, and after depreciation, its book value as of 30 June 2024 is $35,683.

My questions are:

1. If I sell the cabin, will Capital Gains Tax (CGT) apply?

2. If CGT does apply, what will be the cost base—$41,164 or $35,683?

3. If the buyer doesn't have enough cash to pay it one-off. Is it possble for them to have payment plan for 24 months to 36 months?

Thanks in advance.

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(Taxicorn)Taxicorn

15 Aug 2024

The ATO has informed us that this building breaches the in-house asset rule and needs to be disposed of.

Because it is located on land that is not owned by SMSF?

Probably - depends on the nature of the asset
Original cost, reduced for depn or capital works claimed
That would be lending to the buyer - not acceptable if the buyer is an associate of the SMSF.

SMSF auditor will be looking for a plan to rectify the IHA problem.

Best to go directly to the ATO officer who gave you the IHA disposal instructions.

Most helpful reply

(Taxicorn)Taxicorn

15 Aug 2024

The ATO has informed us that this building breaches the in-house asset rule and needs to be disposed of.

Because it is located on land that is not owned by SMSF?

Probably - depends on the nature of the asset
Original cost, reduced for depn or capital works claimed
That would be lending to the buyer - not acceptable if the buyer is an associate of the SMSF.

SMSF auditor will be looking for a plan to rectify the IHA problem.

Best to go directly to the ATO officer who gave you the IHA disposal instructions.

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