Hi All
Regarding property development in an SMSF. I have been hearing mixed views in the industry of late on the issue of a SMSF developing land.
The link below has a case study (albeit from 2005) which says that you can do it.
www.cavendishsuper.com.au/documents/techupdates/CavendishTechnicalUpdateSep05.pdf -
The alternate view is that property development constitutes carrying on a business.
The ATO has always been concerned that an SMSF carrying on a businesses may be in breach of the sole purpose test. This is because conducting the business — rather than providing retirement benefits — may become the sole purpose of the fund.
This issue was raised at the National Tax Liaison Group Superannuation Sub Committee meetings on both 26 October 2005 and 8 February 2006. The minutes of the earlier meeting state:
The Tax Office indicated that there is nothing in the legislation to prevent it. However, there are potentially a number of issues in carrying on a business that might lead to contraventions of the SIS Act and Regulations (such as the sole purpose test, or the borrowing of money). As each case must be considered on its own merits, the Tax Office cannot give a more definite answer.
The ATO's recent publication
Self Managed Superannuation Funds - Roles and Responsibilities of Trustees states:
A possible indication that the sole purpose test has been contravened is where a fund is running a business as part of its investment strategy. If a superannuation fund is conducting a business, it may not be administered for the sole purpose of providing benefits for the members and beneficiaries of the fund.
Another ATO publication DIY Super - It's your money... but not yet! also discusses this issue, but is being reviewed.
In context of the above, I would be very careful before doing property development in my SMSF.
I hope this helps...
PS. On the topic this seminar next week may be of interest to those in Sydney
http://www.apexpartners.com.au/arti...rmation/smsf_property_investors_workshop.html
________________________
Ryan Love
Director
Apex Partners