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Re: Renting an SMSF investment property

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Newbie

Views 1306

Replies 4

If I purchase an investment property using funds from my SMSF, can my daughter rent that property from a real estate agent (independant third party) at market rates 

1 ACCEPTED SOLUTION

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Best answer

ATO Certified

Anonymous

Replies 3

Absolutely NOT, and it does not matter whether there is an indepedant third party acting as an agent and your daugher is paying market rent.

 

It is a direct contravention of the superannuation law and it will make your fund non-complying and the consequences of that could be very costly to your fund, for example you could loose up to half of the value of the assets in the fund in tax and penalties.

 

https://www.ato.gov.au/Super/Self-managed-super-funds/Investing/Restrictions-on-investments/Related-...

 

You can seek further advice from the ATO if you wish by applying for SMSF specific advice.

 

ATO super line 13 28 61

 

 

 

4 REPLIES 4
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Best answer

ATO Certified

Anonymous

Replies 3

Absolutely NOT, and it does not matter whether there is an indepedant third party acting as an agent and your daugher is paying market rent.

 

It is a direct contravention of the superannuation law and it will make your fund non-complying and the consequences of that could be very costly to your fund, for example you could loose up to half of the value of the assets in the fund in tax and penalties.

 

https://www.ato.gov.au/Super/Self-managed-super-funds/Investing/Restrictions-on-investments/Related-...

 

You can seek further advice from the ATO if you wish by applying for SMSF specific advice.

 

ATO super line 13 28 61

 

 

 

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Newbie

Replies 2

I note your great answer, however it reminded me of an article that I read recently. Perhaps once the judgement in the case is studied further it may change the view of this situation:

 

The link is below in regards to media story about the Federal Court judgement.

 

https://www.afr.com/personal-finance/superannuation-and-smsfs/daughters-rental-did-not-breach-sole-p...

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Newbie

Replies 1

Hi,

 

Thanks for your reply. I am having trouble accessing the full article but it may provide the insight I am seeking.

 

Appreciate your help.

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Anonymous

Replies 0

Hi @DETT

that Federal Court case is an interesting one and in that court case the SMSF invested in a sub-fund of a managed investment scheme which held a student apartment. Subsequently, the managed investment scheme rented out the apartment to the daughter of a member of the SMSF.

 

That case has additional layers and far more complex than what you are stating and that is one reason why the ATO has not changed its position which it clearly still publishes on its website.

 

If I know the ATO, and if they beleive that simple straight forward senarios like yours are going to be impacted by this court case then they are likely to appeal to the High court, and to do anything before the entire process is settled at the highest level which would be the High Court, would be very risky.    Also, when court cases have a major impact on how any legislation was intended to work then the Federal Government usually step in and amend the legislation to overcome the issue.

 

You can always still approach the ATO via a request for specific advice and simply put the question to them regarding that court case and what you propose, and it will also give you the opportunity to discuss the entire issue with the ATO.  At least then you will find out how that court ruling applies to situations like yours.

 

 

Yes, you can get many different opinions from third parties on how that court case affects you, but at the end of the day just remember any decision you make impacts on your SMSF financial situaton and where will those third parties be if you are negatively impacted ?

 

Please note Iam not an ATO employee, and like to tell it as it is.