If the property owned by the holding trustee is leased to a related party of the SMSF investor, is the SMSF's interest in the holding trust an in-house asset?

Yes, unless the leased asset would not be an in-house asset of the SMSF if it were owned by the SMSF directly. For example, if the leased asset would be business real property of the SMSF if owned directly, then the SMSF's interest in the holding trust is not an in-house asset as long as the limited recourse borrowing arrangement meets all of the requirements of the super law.

In the case of real property that is being leased by the holding trust trustee (for example, so that rent flows to the SMSF trustee) while the borrowing is paid off, the Commissioner takes the view that the existence of the lease does not cause the investment to fail the tests for the special in-house asset rule to apply.

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    Last modified: 08 Feb 2016QC 20439