You generally cannot use the assets of an SMSF (Self Managed Super Fund) for private or personal use under the sole purpose test. Essentially this means you cannot use the property as your private residence, although some exceptions apply to rural properties. You also cannot use the property as a holiday home, or rent it to family members. Generally this is the case even if you or the family members agree to pay a market rate of rent to live in the property.
However, if the property meets the definition of business real property, you can lease the property to your business as long as it is at a commercial arm’s length basis.
We can put you in touch with specialist accountants & financial advisers to help you decide if buying a property through your super fund is right for you. Call Annette Anderson 0n 0409 731 933 for more information.
Business Real Property Definition
Business real property generally means land and buildings used wholly and exclusively in a business.
If business real property is used in a primary production business such as a farm, it can still meet the test of being used wholly and exclusively in a business even if it contains a dwelling that is used for private or domestic purposes. The dwelling must be in an area of land no more than two hectares and the main use of the whole property can’t be for domestic or private purposes.
You need to ensure the level of investment in business real property still meets the investment strategy of your fund, including diversification of assets, liquidity and maximisation of member returns in your fund.
As with other super fund assets, there can’t be a loan or covenant (charge) over an asset (unless the asset was acquired under a limited recourse borrowing arrangement).
Property that could meet the definition of Business Real Property
We are experienced in sourcing specialised rural properties that could meet the definition of Business Real Property. Please contact Annette Andersen on 0409 731 933 for further information
Self-managed superannuation funds ruling SMSFR 2009/1 business real property
Taxation ruling TR 97/11 Income tax: am I carrying on a business of primary production?
Searches related to smsf rural land