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Umesh Manek

May 03, 2023

Equipment Leasing

in SMSF Technical Forum

The Trustees of the superfund intend to purchase welding equipment from SMSF from an unrelated party (roughly $30,000) and leasing this equipment to an unrelated international company.

Other than valuation of the equipment, do we need to consider any other provisions to avoid any breach?

1 comment

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THE AUDITORS INSTITUTE

May 03, 2023

Best Answer

Hi Umesh

Yes a SMSF can purchase equipment from an unrelated party and rent it to an unrelated party.

SIS sections / regulations to consider are:

1) Section 62 - sole purpose test - does the investment comply with the sole purpose test?

2) Section 109 - arm's length transaction - has there been a commercial lease agreement prepared?

3) Reg 4.09 - Trustees must formulate an investment strategy - does the strategy allow for such an investment?

4) Reg 4.09A - SMSF assets to be kept separate from personal assets - has the equipment been purchased in the name of the Fund?

You should also consider the NALI / NALE rules and also check that an insurance policy has been take out in the name of the Fund for the equipment.

Thanks

SMSF AAA