A senior SMSF executive has outlined some problematic situations where an SMSF real estate asset may not fit the definition of business real property (BRP) even though there is a commercial element involved.
“For a property to be business real property, the whole property needs to be used for business. So sometimes there might be a little bit of confusion where we have a single-title, two-storey property where [you have a] commercial retail [operation] downstairs and an apartment upstairs,” Accurium technical superannuation adviser Jason Hurst told attendees of a technical webinar today.
“If that is on the one title and that apartment is just used as a residence, then that won’t meet [the definition of] business real property.”
Hurst also acknowledged an SMSF premises being used for Airbnb purposes may not qualify for BRP either.
“If a property is used as part of an Airbnb business, then perhaps that could be BRP, but if it’s just one residential property used for Airbnb [purposes], then [it is] probably not [BRP],” he indicated.
According to Hurst, the Accurium help desk often receives questions as to the validity of real estate operating under the National Disability Insurance Scheme (NDIS), which presents another tricky BRP scenario.
“NDIS properties seem to [trigger] common questions. They’re generally residentially designed properties, but if they’re being leased back to an NDIS business, to be used as part of that business, then that would be business real property,” he explained.
“Whereas if [the asset] is just leased directly to residential tenants to live [in], then possibly not.”
Further, he acknowledged a property will most likely not be considered BRP if an individual uses it as a residence, with the exception of some specific circumstances.
“Generally speaking you can’t live in a property and have it be BRP. There are some exemptions for farms and primary production or properties where perhaps someone does need to be on-site all of the time,” he said.
“So perhaps a motel manager or a night security guard.
“But if they’re just sleeping there during their non-work time, usually it will not be business real property.”
