Residential Property

Working from home not business real property

SMSF business real property

Using personal real estate property to conduct a business during COVID-19 lockdowns will not transform it into business real property for SMSF purposes.

SMSF members who are working from home cannot include the property as part of a business as it will not meet the definition of business real property.

Speaking during the SMSF Association Virtual Technical Summit today, Colonial First State head of technical services Craig Day said the lockdowns that have taken place across Australia since March 2020 have caused a spike in interest about running a business from home and whether it could be connected to an SMSF.

“The property must be used wholly and exclusively in one or more businesses,” Day said.

“Now that people are working from home, does that allow them to qualify a property as business real property and therefore transfer it into a SMSF?

“The answer here [is] is it wholly and exclusively used because part use for private or domestic purposes means it will not qualify.”

He added creating a separate lease for a business, such as working from a garage or shed, was also likely to not be considered as business real property for SMSF purposes.

“A good example is a mixed-use property with a downstairs shop and an upstairs residential unit, which are both on the one title, but with separate leases. It still fails the business real property definition. This is because the property is not being used, wholly and exclusively, in the course of carrying on a business,” he said.

He also said it was likely COVID-19 rent relief would return under similar conditions seen during the 2020 income year, but tracking the relief remained important.

“In this situation, if we’re getting that rent relief coming through at a later date, make sure you properly identify when those rent repayments are coming back in because you don’t want them looking like it’s a higher amount of the rent over and above market, because that can potentially be non-arm’s-length income,” he noted.

Copyright © SMS Magazine 2024

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital