The ATO has provided DomaCom with advice that will pave the way for trustees and members to invest in family property via the company’s fractional property offering.
In advice provided to the company last week, the tax office said an investment by an SMSF in acquiring property held in a DomaCom sub-fund would not, in its opinion, contravene the Superannuation Industry (Supervision) Act provided the SMSF and related parties acquired less than 50 per cent of the units in the sub-fund created after a successful public book build, and the property was not acquired from a related party.
“For DomaCom, now in the middle of an IPO, this is a critical opinion from the ATO [and] we believe it is a very significant development that will drive growth in the company,” DomaCom chief executive Arthur Naoumidis said.
“For the first time, SMSF members can use some of their super money to invest in a property jointly with their children to help them acquire a house to live in.
“In addition to helping their children get into property, this opinion will allow SMSF trustees flexibility in respect of their residential property investments, including allowing SMSFs to co-invest with other SMSFs to create specialist accommodation for children with disabilities or special needs.”
DomaCom was continuing its discussions with the ATO to also raise the 50 per cent limit to 100 per cent, but even at 50 per cent it was a game changer, Naoumidis said.
“The fact is, most SMSFs don’t have high enough balances for that to be an issue and DomaCom believes that, if successful, the limit will be increased over time as the housing affordability issue can only get bigger,” he noted.
“Until this process is completed, investors will need to seek specific advice or further ATO advice if they want to acquire more than 50 per cent of a specific sub-fund.”
What was important now was that the federal government recognised there were commercial solutions to the issue of housing funding for those looking to buy property, he said.
“Unlike some overseas models, where money is released from the pension to help people acquire their first property, this Australian innovation keeps the asset within the superannuation environment,” he said.
Furthermore, for the accounting and financial planning community, the tax office’s opinion on the DomaCom Fund would provide a valuable additional tool to engage clients with “functional” investment opportunities in a market that was engaging all generations, he added.
The ATO noted an SMSF investor would need to seek independent professional advice or seek specific advice from the tax office about how the super regulatory rules applied to their individual circumstances if they were contemplating investing in the DomaCom Fund if it was proposed the underlying property to be acquired by the responsible entity for the purposes of the relevant sub-fund was to be tenanted by or leased to a party that was related to the SMSF.
