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In a presentation to the SMSF Australian Auditors\u2019 Association Conference in Sydney last week, Mr Delahunty said the rules around property investment for SMSF is clear cut and there are three key considerations for trustees \u2013 that the investment meets the \u2018sole purpose test\u2019 of solely providing retirement benefits to fund members, that it satisfies the trust deed and investment strategy of the SMSF and that it is not prohibited by the super laws.<\/p>\n
Mr Delahunty said a SMSF needs to be maintained for the sole purpose of providing retirement benefits to its members, or to their dependants if a member dies before retirement.<\/p>\n
\u201cIt\u2019s likely your fund will not meet the sole purpose test if you or anyone else, directly or indirectly, obtains a financial benefit when making investment decisions and arrangements other than increasing the return to your fund,\u201d he said.<\/p>\n
\u201cA fund fails the sole purpose test if it provides a pre-retirement benefit to someone \u2013 for example, personal use of a fund asset which was set out in the sole purpose test implications of fractional property investments following the Full Federal Court decision in Aussiegolfa Pty Ltd (Trustee) v Commissioner of Taxation [2018] FCAFC 122<\/strong>.\u201d<\/p>\n He continued that the super laws require that trustees must prepare and implement an investment strategy for their SMSF and give effect to and review their strategy regularly.<\/p>\n \u201cThe strategy must consider the risks involved in making, holding and realising, and the likely return from the fund\u2019s investments regarding its objectives and cash flow requirements,\u201d he said.<\/p>\n \u201cIt must also look at the composition of the fund\u2019s investments including the extent to which they are diverse and the risks of inadequate diversification and finally the liquidity of the fund\u2019s assets and its ability to pay benefits and other costs it incurs.\u201d<\/p>\n \u00a0Asset concentration risk, he said, is heightened in highly leveraged funds, such as where the trustee has used a limited recourse borrowing arrangement to acquire the asset.<\/p>\n There has been a growing trend in property investment over the past five years, with the ATO data revealing that in 2020\u201321 overall SMSF investment in real property was $166.9 billion out of approximately $800 billion in total SMSF assets.<\/p>\n Total investment in real property grew to $166.9 billion in 2020\u201321, up from $163.0 billion in 2019\u201320 and $137.0 billion in 2016\u201317. Direct investment in non-residential real property grew by 15 per cent from $64.7 billion in 2016\u201317 to $74.7 billion in 2020\u201321. Investment in 2019\u2013 20 was $73.1 billion.<\/p>\n The trend continued in residential property investment which has also risen over the past five years, increasing by 23 per cent from $33.7 billion in 2016\u201317 to $41.6 billion in 2020\u201321. Investment in 2019\u201320 was $39.1 billion.<\/p>\n A spokesperson for the ATO said it cannot help trustees prepare their SMSF investment strategy, as this could amount to the provision of financial advice.<\/p>\n \u201cIf trustees need assistance, we recommend they work with a registered SMSF adviser or a qualified, licensed financial adviser,\u201d the spokesperson said.<\/p>\n \n\u00a0<\/p>\n By Keeli Cambourne \u00a0<\/p>\n \u00a0<\/p>\n","protected":false},"excerpt":{"rendered":" \u00a0<\/p>\n Property investment by an\u00a0SMSF\u00a0will fail the sole purpose test if it provides pre-retirement benefit to someone such as personal use of a fund asset, warned the\u00a0ATO\u00a0director of the\u00a0SMSF\u00a0Auditors Segment.<\/em><\/strong><\/p>\n \u00a0<\/p>\n","protected":false},"author":1,"featured_media":1536,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[4],"tags":[],"_links":{"self":[{"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/posts\/1535"}],"collection":[{"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/comments?post=1535"}],"version-history":[{"count":1,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/posts\/1535\/revisions"}],"predecessor-version":[{"id":1537,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/posts\/1535\/revisions\/1537"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/media\/1536"}],"wp:attachment":[{"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/media?parent=1535"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/categories?post=1535"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/tags?post=1535"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\n30 March 2023
\nmomentumconnect.com.au<\/p>\n