ATO Interpretative Decision
ATO ID 2002/732 (Withdrawn)
Superannuation
Retirement Income Entities - Acquisition of residential property from membersFOI status: may be released
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This ATO ID has been withdrawn from the database as it is superseded by paragraphs 276 to 278 of SMSFR 2009/1 Self Managed Superannuation Funds: business real property for the purposes of the Superannuation Industry (Supervision) Act 1993.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 section 66 of the Superannuation Industry (Supervision) Act 1993 (SISA) occurred where the trustees acquired a residential property from the members?
Decision
Yes. A contravention of section 66 of the SISA has occurred.
Facts
The superannuation fund purchased a residential dwelling from the members.
The property had been owned by the members since 1994 and was rented to third parties. This practice continued, after the superannuation fund acquired the property. The residential dwelling was the sole residential dwelling owned and rented by the members.
Reasons for Decision
Section 66 of the SISA generally prohibits the trustee of a regulated superannuation fund from acquiring an asset from a related party of the fund. One of the exceptions to this general prohibition is if the asset is business real property of the related party acquired at market value (where the fund is a superannuation fund with fewer than five members).
The trustees acquired a residential property that had been used for rental purposes by the fund members. For real property to meet the definition of 'business real property' in subsection 66(5), it must be '....used wholly and exclusively in one or more businesses'.
Paragraphs three to five of Taxation Ruling IT2423 is also relevant in determining whether the letting of property amounts to carrying on a business. In particular paragraph 5 states 'An individual who derives income from one or two residential properties would not normally be thought of as carrying on a business.'
The renting of the residential property did not constitute carrying on a business. The property acquired from the members was not 'business real property' as defined in subsection 66(5) of the SISA.
As the trustees of the superannuation fund acquired an asset from a related party, which did not meet any of the exceptions included in subsection 66(2) of the SISA, there has been a contravention of section 66 of the SISA.
Date of decision: 3 May 2001
Legislative References:
Superannuation Industry (Supervision) Act 1993
Section 66
Subsection 66(2)
Subsection 66(5)
Related Public Rulings (including Determinations)
Taxation Ruling IT 2423
Keywords
Self managed superannuation funds
SMSF investments
SMSF acquisition of assets
SMSF business real property
SMSF breach of compliance
SMSF related parties
ISSN: 1445-2782
| Date: | Version: | |
| 3 May 2001 | Original statement | |
| You are here | 14 May 2010 | Archived |