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Jayni Patel

Jul 24, 2023

Business real property and tenancy in common

in SMSF Technical Forum

Just had an issue that I wanted to clarify re. in-house assets and related parties.

Purchased a commercial property (which she will use as her dental practice) but not enough cash in the SMSF for a deposit/LRBA. Purchased as a tenancy in common.

but looking at s71 (i) "property owned by the superannuation fund and a related party as tenants in common, other than property subject to a lease or lease arrangement between a trustee of the fund and a related party" throws me off.

Especially given that s71 (g) specifically allows for investment into a BRP.

Does s71(i) refer to residential properties only? Or does it also encapsulate BRP? whether the property purchased by client will be considered in-house asset or not please?

2 comments

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THE AUDITORS INSTITUTE

Jul 25, 2023

Hi Jayni

I agree sections 71(1)(i) & 71(1)(g) do not appear to be consistent with each other.

Business real property (BRP) is defined in section 66 as "any interest" in land "where the real property is used wholly and exclusively in one or more businesses".

My understanding has always been that a SMSF under section 71(1)(g) of SIS can rent any interest in property to a related party if the property is business real property. Under the "BRP" definition this can include a SMSF having a partial interest in the property as it can be "any interest" in land. That is a SMSF can invest in a property with a related party as tenants in common and rent that property to a related party if the property is BRP.

If any other members have a view please let the forum know.

Thanks

THE AUDITORS INSTITUTE

Jayni Patel

Jul 26, 2023

Replying to

Thank you. Your response is much appreciated.