An audit specialist has recommended SMSF practitioners should draw up a checklist to ensure any fund that purchases business real property (BRP) via a limited recourse borrowing arrangement (LRBA) complies with the law in regards to the actual use of the acquired asset.
Super Clarity director Shelley Banton said while the rules around the purchase of BRP via an LRBA will not change on 10 August when restrictions are placed on the acquisition of residential property, ATO guidance around the change in law has made specific mention of the use of BRP in SMSFs.
“[The status of a] BRP rests on the underlying use of the property only. It doesn’t matter whether it’s commercial or residential, as long as it’s being used wholly and exclusively in business,” Banton said during a presentation at the SMSF Association Technical Summit 2026 in Sydney last week.
“So you can have property that is commercial, but is not business real property and, on the flip side, have residential property which is used wholly and exclusively in a business, such medical offices and dental offices.
“The best ‘get-out-of-jail-free card’ is to provide a checklist for your clients, which will mitigate your future risk, via a document which states this is an analysis of the property that we’re going to acquire into the fund and this is why it is BRP.
“You can develop your own checklist and start off by looking at factors such as what is the property and is it multi-use, residential or BRP that is used wholly and exclusively in a business, what is the purpose of the property and how is that going to work with the business use test.
“Next, you have a business use analysis to understand who the tenant is going to be, what the business they are in does and how the property will be wholly and exclusively used in business.”
She added the checklist should also consider any lease arrangements and whether they are on commercial terms with market value rent, particularly where a related party is involved, and whether the property aligns with the fund’s investment strategy.
“Ensure you then have all the documentation to back this up because you want to be able to provide the auditor, the ATO and your client with a complete package which shows the property is BRP and the trustee understands that before they have taken that property into their super fund,” she said.
“Finally, a trustee resolution done before the property was taken in shows the trustee’s intent, they understand what they are doing and it’s an acquirable asset which complies with the rules before it was done, so regardless of what happens in the future, at acquisition, it was 100 per cent BRP.”
Jason Spits
SENIOR JOURNALIST
Jason is a senior journalist with Benchmark Media and writes for the selfmanagedsuper website and magazine and smstrusteenews website. He has covered financial services since 1999 and has written about life insurance, superannuation, investment management and financial advice, in both a freelance and in-house capacity, and also did a brief stint as a media manager for an industry association. He has been the editor of trade titles Money Management and Financial Standard, and was most recently senior journalist with life insurance title Riskinfo.
Articles by Jason