A specialist SMSF adviser has reminded practitioners of the need for a fund to have an eligible interest in a piece of real estate for it to be classified as business real property.
Accurium superannuation adviser and trainer Natalie Scott noted this is one of two tests needing to be satisfied for an asset to be considered business real property, but is often overlooked with priority being given to the business use requirement.
Scott pointed out there are a variety of factors to take into account to establish the nature of a property asset as to whether an SMSF has an eligible interest in it, including fixtures forming part of the land.
To illustrate, she used an example where an SMSF owned a piece of land and leased it to a business completely owned by the fund members. However, with expansion in mind, the SMSF purchases a storage unit that will be converted into an office for the business, presenting the issue of whether the storage unit will qualify as business real property.
“Whether the storage unit will be an issue or not will depend on whether it’s considered to be a fixture to that land. So there are a number of things you need to think about in relation to that,” Scott told attendees of a technical webinar held today.
“In general you’d [have to look at] whether it’s connected to plumbing, for example, [or] electrical [connections], can we remove it easily from the land, is it attached to the land more than just sitting on the land, would the removal of that storage unit damage the property in any way, and the period of time it might be sitting there as well.
“So you’d generally be looking at these [characteristics] and if [they exist], then [the storage unit] is likely to be considered a fixture [to the land].”
She referred practitioners to the ATO’s Self Managed Superannuation Funds Ruling 2009/1 for guidance on the subject.
