Parent’s SMSF buys a commercial premises for daughter and son-in-law to run a retail business. So far so good, right? What if there is a residence out the back of the commercial premises? Does daughter and son-in-law living in the residence contravene the sole purpose test?
Sole purpsose test may be fine but the property will most likely not continue to meet the Business Real Property exemption.
Time for a quick read of SMSFR 2009/1 Self Managed Superannuation Funds: Business real property for the purposes of the Superannuation Industry (Supervision) Act 1993 http://law.ato.gov.au/atolaw/view.htm?DocID=SFR/SMSFR20091/NAT/ATO/00001#P230
Specifically – ATO Example 24: Inner city design studio
- Lisa owns a double story premises from which she runs a design business in the inner suburbs of Sydney. During business hours Lisa and her employees use the ground floor as their public consultation area. They use the top floor as a lunch room and meeting area.
- Lisa travels often. She finds herself in Sydney for only about two weeks in every month. During non-working hours, when she is in Sydney, Lisa uses the top floor as her primary residence. She cooks meals in the kitchenette and sleeps on a futon that doubles as a couch during the day. She stores clothes and other personal effects in a wardrobe and small cupboard in one corner of the room.
- Lisa is a member of the Gus SMSF. Lisa wants to sell the premises to the trustee of the Gus SMSF at market value.
- The property is not business real property of Lisa. Although the premises are primarily used in her business, Lisa’s regular use of the top floor as a residence is not incidental and relevant to the business and is more than a trifling use. Acquisition of the premises by the Gus SMSF will breach the related party asset acquisition rule in section 66.