ATO Interpretative Decision
ATO ID 2002/703 (Withdrawn)
Superannuation
Retirement income entities : Lease arrangement between members and their self managed superannuation fund after 11 August 1999FOI status: may be released
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This ATO ID is a simple restatement of the law and does not contain an interpretative decision.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
Status of this decision: Decision Withdrawn 30 April 2010
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Whether the transitional arrangements in section 71C of the Superannuation Industry (Supervision) Act 1993 (SISA) apply to a lease arrangement between a member and a self managed superannuation fund (SMSF)?
Decision
Yes, the transitional arrangements in section 71C of the SISA apply to real property subject to a lease arrangement between a member and a SMSF where the arrangement was entered into on or after 11 August 1999 and on or before 23 December 1999.
Facts
The SMSF owns a residential property.
During the 2000 financial year the property was tenanted for a period of three weeks by a member of the SMSF. The period of three weeks tenancy occurred in September 1999 (one week), and two consecutive weeks in December 1999 and January 2000 commencing before 23 December 1999.
Reasons for Decision
Real property subject to such a lease arrangement, at all times that it is subject to the arrangement, will not count as an in-house asset for the period commencing 11 August 1999 and ending 30 June 2001. A 'lease arrangement' includes any agreement, arrangement or understanding in the nature of a lease (other than a formal lease) between the trustee of a fund and another person, under which the other person uses, or controls the use of, property owned by the fund.
Section 71 of the SISA states that an in-house asset of a superannuation fund 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, not relevant here, is real property of an SMSF subject to a lease or a lease arrangement which is business real property of the fund throughout the period of the lease or lease arrangement.
Under subsection 10(1) of the SISA a 'related party' of a superannuation fund includes a member of the fund.
Subsection 71(1) of the SISA will operate to make the real property of the SMSF, subject to the September 1999 and December 1999 lease arrangements between the fund and the member, an in-house asset of the fund during the times it was subject to these lease arrangements. However, subsection 71C(2) of the SISA provides that where real property of a fund is subject to a lease arrangement, or any uninterrupted sequence of lease arrangements, commencing after 11 August 1999 and on or before 23 December 1999, then the real property subject to the arrangements will not be an in-house asset at any time before 1 July 2001.
Therefore, as the three weeks tenancy with the member of the SMSF was entered within the transition time (between 11 August 1999 and 23 December 1999) the asset is not considered to be an in-house asset during the times it was subject to the arrangements.
However, any real property subject to a new lease arrangement between the member and the SMSF entered into after 23 December 1999 would be an in-house asset. The only exception is where the arrangement forms part of an uninterrupted sequence of lease arrangements between the fund and the member where the first arrangement commenced on or before 23 December 1999.
Date of decision: 21 May 2001
Legislative References:
Superannuation Industry (Supervision) Act 1993
Subsection 10(1)
Section 71
Section 71C
Keywords
Superannuation fund in house assets
Self managed superannuation funds
SMSF notification of breach
ISSN: 1445-2782
| Date: | Version: | |
| 21 May 2001 | Original statement | |
| You are here → | 30 April 2010 | Archived |