A specialist adviser has dispelled one misconception as to a characteristic an asset must possess in allowing it to satisfy the business use test and subsequently qualify as business real property.
The business use test stipulates the real property must be used wholly and exclusively in one or more businesses and Accurium superannuation adviser and trainer Natalie Scott confirmed the role a tenant’s Australian business number (ABN) plays in meeting this criteria.
“Would an ABN be acceptable as identifying [the tenant] is carrying on a business? Not necessarily. While it is an indicator, we really need to go back to the concept identified in TR (Taxation Ruling) 97/11 [as to whether] you’re carrying on a business or not because a lot of people who [participate in] hobbies still do apply for an ABN, but when you come to [prepare the tax returns for the operation] you realise they aren’t carrying on a business,” Scott noted.
“It would definitely be an indicator though.”
She also confirmed the operation using the business real property owned by an SMSF does not need to have a connection with the fund members.
According to Scott, this is a common query relating to SMSFs.
“There is no requirement that the person who uses the property is a related party of the [fund] members. It just so happens that quite often this is the case [because it is a way for clients to help] their business [while at the same time] growing their super,” she explained.
“That is a common structure, but it doesn’t have to be the only way to do it. For example, you could have an SMSF member who owns a commercial office space and its lease to an accounting firm may have nothing to do with the member at all.
“[It may have been] leased out [to the accounting firm] for years, it is continuing to rent the [premises], but it was just bought by the member as an investment they wanted to [own] in the SMSF to help [achieve] their retirement goals.”
