SMSF - Property Management

[Scott No Mates]

Not sure if this should sit in the Legal, Accounting or PM forum but feel free to answer:

If an SMSF has either commercial, residential or both types of property as part of its assets are there any restrictions with regards to who can manage those properties ie: if one of the members of the fund were a licensed property manager & managed the portfolio for a fee would this be classified as receiving a benefit from the fund hence breaching the SMSF laws? (Or would it be more prudent to pay an external party for this work)?

 

[Terry_w]

I recall reading a Tax Ruling which states that a properly licenced and qualified professional could charge the SMSF commercial rates, even if they were a member of that fund.

There may also be an argument that if they don't charge the SMSF market rates then this could be a contribution to the fund. One example could be a builder doing work on a property without taking payment.

 

[Scott No Mates]

Thanks Terry.

 

[Property Hoarde]

refer to Section 17B of the SIS ACT for the requirements,

(1) Paragraphs 17A(1)(f) and (2)(c) do not apply to remuneration for any duties or services performed by a trustee of a fund, if:

(a) the trustee performs the duties or services other than in the capacity of trustee; and

(b) the trustee is appropriately qualified, and holds all necessary licences, to perform the duties or services; and

(c) the trustee performs the duties or services in the ordinary course of a business, carried on by the trustee, of performing similar duties or services for the public; and

(d) the remuneration is no more favourable to the trustee than that which it is reasonable to expect would apply if the trustee were dealing with the relevant other party at arm's length in the same circumstances.

http://www.austlii.edu.au/au/legis/cth/consol_act/sia1993473/s17b.html

 

[Property Hoarde]

There may also be an argument that if they don't charge the SMSF market rates then this could be a contribution to the fund. One example could be a builder doing work on a property without taking payment.

I expect to see more on this issue over the next year or so.

I was at a NTAA conference a coupe of months ago and they suggested that the contribution could be the value increase to the property of the work not what the cost of the work would have been.

 

[Scott No Mates]

If the contribution/increase in value then exceeds the RBL will s penalty be applied?

 

[Property Hoarde]

If the contribution/increase in value then exceeds the RBL will s penalty be applied?

If you mean contributions caps. Yes if means they go over their Contribution caps there will be penalties.