SMSF Question

[buzzlightyear]

‘Business real property’ of an entity generally relates to land and buildings used wholly and exclusively in a business. Trustees of SMSFs are permitted to acquire up to 100% of the fund’s total assets as ‘business real property’.

The above is one of the exceptions granted to SMSF's in the acquisition of assets from related parties.

Just wanting to get the learned opinions of everyone here. I am aware that normal residential properties is not considered as a running of a business, however would the 'letting out' of a car park space (not mortgaged), which is generally leased out on a 'commercial lease' basis be considered running of a business?

 

[Qlds007]

Hi Buzz

ATO Superannuation Circular No. 2003 sets out the Tax Office's preliminary views on what wil be considered part of Business real property so this might be a good place to start.

This circular mainly refers to fixtures and fittings within a Commercial Building but will cover a car park.

My initial view would be that subject to the Trust Deed Investment objectives including such an investment and it was leased at a commercial rent then you would be ok.

 

[Pushka]

Are you saying that the car park is part of your residence, but leased out on a commercial basis? If so, then you would need expert advice because unless it is on a separate title, then it might be a problem.

 

[buzzlightyear]

I purchased the car park some time ago separately and on its own title. It is not associated with the IP which I own in the building (which has its own car park)

Based on the initial information sources through the web (haven't asked a professional yet), the exceptions to asset acquisitions from related parties by a SMSF being relevant in this case would be that the asset is ‘business real property’.

The definition of business real property relates to land and buildings used wholly and exclusively in a business. Leasing that car park then would probably rest on the use of the car park by the lessee. Given its location and most likely use, would probably not fall in the above definition.

 

[live2fish]

Hi Buzz

I recently purchased a small block of land which has established car parking bays. I lease it to the local supermarket for a small fee, which allows me to claim the interest payments.

The advice that i have from my account, is that this is classed as Business Real Property, and my SMSF is able to buy a portion or whole property from myself. Obviously, you would need to run it past your accountant or ATO to be certain.

Regards

Wayne

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