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  • Guidance for SMSFs on fractional property investment

    We're confirming our approach to the sole purpose test for fractional property investment products, such as the DomaCom Fund that was the subject of a the Full Federal Court decision in Aussiegolfa Pty Ltd (Trustee) v Commissioner of Taxation [2018] FCAFC 122External Link.

    As indicated in our Decision impact statement, self-managed super fund (SMSF) trustees could potentially contravene the sole purpose test by investing in a Sub-Fund of the DomaCom Fund if the facts and circumstances indicate that the SMSF was maintained for the collateral purpose of providing accommodation to a related party. This is consistent with our long-standing views in SMSF Ruling 2008/2.

    To address this, DomaCom Australia Ltd (DomaCom) have updated their product requirements to include a ‘Sole Purpose Test Declaration’ and made it available to their SMSF trustee investors.

    By signing this declaration, the trustee undertakes to avoid behaviour that would give us concern relating to contravention of the sole purpose test. A sample copy of the declaration can be found in DomaCom's ASX media release (PDF 377KB)This link will download a file dated 31 October 2019.

    We will not apply compliance resources to scrutinise the sole purpose test where a trustee investing in DomaCom's fund signs this declaration, and there is no evidence that their actions contradict it.

    We welcome others offering similar fractional investment products who are considering the sole purpose test implications of their product to talk with us to explore a similar approach. This supports our continued commitment to provide practical and administrative certainty to SMSF trustees.

    Our guidance on ato.gov.au will be updated to provide more detail on our compliance approach and the ‘Sole Purpose Test declaration’ that DomaCom have introduced.

    If you have any questions about fractional property investment and the sole purpose test, contact us by using our Request for specific advice form.

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      Last modified: 21 Nov 2019QC 60629