ATO Interpretative Decision
ATO ID 2002/659
Superannuation
Retirement income entities: In-house assets and leasing property from a memberFOI status: may be released
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This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Has a contravention of Division 3 of Part 8 of the Superannuation Industry (Supervision) Act 1993 (SISA) occurred when a self managed superannuation fund (SMSF) leased residential property to the member/s of the SMSF and the value of the leased property compared to the total assets of the fund exceeded the in-house asset limits set out in Division 3 of the SISA?
Decision
Yes, a contravention of Division 3 of the SISA has occurred when the SMSF leased residential property to the member/s of the SMSF.
Facts
The SMSF owns a residential property.
After 23 December 1999 the SMSF leased the property to the member/s of the fund for residential purposes.
Reasons for Decision
Under section 71 of the SISA an in-house asset of a SMSF includes '... an asset of the fund subject to a lease or lease arrangement between the trustee of the fund and a related party of the fund'. The only exception is where the asset subject to the lease or lease arrangement is used in a business carried on by the member or some other person.
Subsection 10(1) of the SISA provides that a member of a fund is a related party of the fund.
As the lease arrangement was between the members of the SMSF in their personal capacity and the trustees of the SMSF, the asset will be considered an in-house asset. A contravention of the SISA will occur if the market value ratio of the SMSF's in-house assets exceeds 10 percent of the value of the total assets of the fund at the end of the 1999-2000 year of income.
Date of decision: 21 May 2001
Legislative References:
Superannuation Industry (Supervision) Act 1993
Section 71
Subsection 10(1)
Keywords
Superannuation fund in house assets
Self managed superannuation funds
SMSF notification of breach
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 21 May 2001 | Original statement |
| 16 April 2010 | Archived |