Vacant land can be BRP

SMSF business real property vacant land wholly and exclusively threshold

Advisers should note in some circumstances pieces of vacant land can be considered business real property and may be held in an SMSF for that purpose.

A technical specialist has confirmed vacant land in some instances can be considered business real property for the purposes of acquisition and inclusion in an SMSF.

“The question over vacant land is often raised with regard to what the vacant land is representing. [For example], if it’s vacant land that sits beside an existing business premises, then what the land is used for needs to be determined and if there is the wholly and exclusively element attached to it,” Smarter SMSF technical and education manager Tim Miller noted during a SuperGuardian webinar hosted today.

“So when we talk about things such as utilising vacant land for car parking spaces for business purposes, then there is scope to [treat it as business real property] if it is mapped out as such.”

Miller reminded practitioners the wholly and exclusively threshold must be applied to business real property in the context of any or all uses of the land in question.

To illustrate the conditions required to be satisfied in order for vacant land to be treated as business real property, he used an example where the owners of a vacant piece of land allowed their son to park his work trucks on it occasionally without charging any fee for the arrangement.

He pointed out in this instance the vacant land would not be considered business real property.

“Firstly, we have to look at the two conditions. Condition one is [to ask] is it an eligible interest in business real property? The answer is yes it is. Then the second part is [to determine if the land] is used wholly and exclusively in a business,” he noted.

“In this instance the owners are not using it wholly and exclusively for business purposes. If for example there was fencing around it and their son was paying commercial rates over a lease to store his business assets, his equipment and trucks on the property and it was on a permanent basis, then you would say it meets the definition.

“But in this instance, because it is not regular use and only on the odd occasion, then the commissioner would say it doesn’t satisfy the definition of business real property.”

Copyright © SMS Magazine 2024

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital