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SMSF - Loophole in "related party" rules

Discussion in 'Superannuation, SMSF & Personal Insurance' started by Doogs2009, 30th Apr, 2010.

  1. Doogs2009

    Doogs2009 New Member

    Joined:
    30th Apr, 2010
    Posts:
    1
    Location:
    Newcastle, NSW
    Hi

    I have been doing some research on SMSF's where i want to purchase an investment property using my super. I am aware of the In House - related party rules but was wondering if any one new of any work-around or loopholes in these. Is is possible to appoint a caretaker in a houseminding capacity to reisde in the property and get them to pay you the landlord in lieu of rent. Say if a family member was to act as a caretaker for you because the property was in a distant location, and the family member didnt pay you rent, could this be done and acceptable under the guidelines.

    Any info offered would be appreciated.

    Thanks
     
  2. Superman

    Superman Well-Known Member

    Joined:
    6th Nov, 2007
    Posts:
    343
    Location:
    Gold Coast, QLD
    You can't lease or allow a related party to lease or utilise a residential property owned by your SMSF - even if they pay full market rent.

    Commercial property is OK provided it is all done at arms-length - but not residential.

    There are so many issues with your idea I don't know where to start.

    If you do either of your strategies you will at a minimum breach the in-house asset rules and also the sole purpose test (and probably a whole bunch of other ones) and make your SMSF non-compliant and lose 45% of the assets. Not to mention huge fines and jail time for the trustees personally.

    To answer your question there are no loop-holes or work arounds in the in-house asset rules - and to back it up is Sec 85 of the SIS Act which is an anti-avoidance provision - meaning anything you do to try and avoid the in-house assets will be picked up.

    Nothing you have suggested would be 'done and acceptable under the guidelines'. Sorry.

    DO NOT EVEN ATTEMPT ANYTHING LIKE WHAT YOU ARE SUGGESTING.

    If you want to purchase a property as part of your SMSF investment strategy go ahead if it is right for you - but lease it to an unrelated party and get market value rent.

    It is hard enough saving for retirement without entering into a scheme which would not only put 45% of your super assets at risk (and potentially huge personal fines and/or jail for the trustees) but where your SMSF would also miss out on the rental return it deserves - it just doesn't make sense! Your super is for your retirement - it is not a charity to give family members a free ride.

    I suggest you click here to complete some SMSF trustee education.

    Have a good weekend.
    SM
     
  3. pestgirl

    pestgirl SMSF novice

    Joined:
    28th Apr, 2009
    Posts:
    10
    Location:
    Windsor nsw
    Thanks Superman

    I have just been reading up on SMSF's... and thanks for the link that you suggested to Doogs2009.

    I have just completed the e-learning course.... which everyone who has a SMSF should do..... thanks again for the link :) :)