ATO Interpretative Decision

ATO ID 2002/702

Superannuation

Retirement income entities: Leasing property to members on non-arms length basis.
FOI status: may be released

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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 65 of the Superannuation Industry (Supervision) Act 1993 (SISA) occurred when the member of a self managed superannuation fund (SMSF) failed to pay rent when leasing residential property owned by the superannuation fund?

Decision

Yes, a contravention of section 65 of the SISA has occurred where a member of an SMSF failed to pay rent when leasing residential property owned by the SMSF.

Facts

The SMSF owns a residential property.

During the financial year the property was tenanted for a period of three weeks by a member of the SMSF.

Payment was made for only two weeks tenancy, the trustee not requiring payment for the third week's rent.

Reasons for Decision

Subsection 65(1) of the SISA prohibits a trustee of a regulated superannuation fund from lending money of the fund or giving any other financial assistance using the resources of the fund to a member of the fund or a relative of a member of the fund.

A loan is defined in section 10 of the SISA to include 'the provision of credit or any other form of financial accommodation, whether or not enforceable or intended to be enforceable, by legal proceedings.'

The provision of free residential accommodation by the SMSF to a member constitutes the giving of financial assistance using the resources of the fund to a member of the fund. Therefore a contravention of section 65 of the SISA has occurred.

The penalty for a breach of this section is a civil penalty.

Note, this could also give rise to a contravention of section 109 of the SISA for non-arms length transaction.

Date of decision:  21 May 2001

Legislative References:
Superannuation Industry (Supervision) Act 1993
   Section 10
   Section 65
   Section 109

Keywords
Self managed superannuation funds
SMSF notification of breach
SMSF loans

Business Line:  Superannuation

Date of publication:  24 July 2002

ISSN: 1445-2782

history
  Date: Version:
You are here 21 May 2001 Original statement
  25 July 2008 Archived

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