{"id":631,"date":"2023-10-30T10:04:52","date_gmt":"2023-10-30T10:04:52","guid":{"rendered":"https:\/\/rosatiwangsuper.com.au\/blog\/?p=631"},"modified":"2023-10-30T11:49:04","modified_gmt":"2023-10-30T11:49:04","slug":"risks-in-smsfs-renting-business-real-property-to-related-parties","status":"publish","type":"post","link":"https:\/\/rosatiwangsuper.com.au\/blog\/2023\/10\/30\/risks-in-smsfs-renting-business-real-property-to-related-parties\/","title":{"rendered":"Risks In SMSF’s Renting Business Real Property To Related Parties"},"content":{"rendered":"\t\t
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\n\t\t\t\t\t\n\n\n\tROSATI WANG Super - Self-managed superannuation fund audits<\/title>\n\t<!-- Icon fonts -->\n\t<link href=\"https:\/\/sa-digital.com.au\/rosati\/assets\/css\/font-awesome.min.css\" rel=\"stylesheet\" \/>\n\t<link href=\"https:\/\/sa-digital.com.au\/rosati\/assets\/css\/flaticon.css\" rel=\"stylesheet\" \/><!-- Bootstrap core CSS -->\n\t<link href=\"https:\/\/sa-digital.com.au\/rosati\/assets\/css\/bootstrap.min.css\" rel=\"stylesheet\" \/><!-- Plugins for this template -->\n\t<link href=\"https:\/\/sa-digital.com.au\/rosati\/assets\/css\/animate.css\" rel=\"stylesheet\" \/>\n\t<link href=\"https:\/\/sa-digital.com.au\/rosati\/assets\/css\/owl.carousel.css\" rel=\"stylesheet\" \/>\n\t<link href=\"https:\/\/sa-digital.com.au\/rosati\/assets\/css\/owl.theme.css\" rel=\"stylesheet\" \/>\n\t<link href=\"https:\/\/sa-digital.com.au\/rosati\/assets\/css\/slick.css\" rel=\"stylesheet\" \/>\n\t<link href=\"https:\/\/sa-digital.com.au\/rosati\/assets\/css\/slick-theme.css\" rel=\"stylesheet\" \/>\n\t<link href=\"https:\/\/sa-digital.com.au\/rosati\/assets\/css\/owl.transitions.css\" rel=\"stylesheet\" \/>\n\t<link href=\"https:\/\/sa-digital.com.au\/rosati\/assets\/css\/jquery.fancybox.css\" rel=\"stylesheet\" \/>\n\t<link href=\"https:\/\/sa-digital.com.au\/rosati\/assets\/css\/bootstrap-select.css\" rel=\"stylesheet\" \/><!-- Custom styles for this template -->\n\t<link href=\"https:\/\/sa-digital.com.au\/rosati\/assets\/css\/style.css\" rel=\"stylesheet\" \/><!-- HTML5 shim and Respond.js for IE8 support of HTML5 elements and media queries --><!--[if lt IE 9]>\n <script src=\"https:\/\/oss.maxcdn.com\/html5shiv\/3.7.3\/html5shiv.min.js\"><\/script>\n <script src=\"https:\/\/oss.maxcdn.com\/respond\/1.4.2\/respond.min.js\"><\/script>\n <![endif]-->\n\t<link href=\"https:\/\/sa-digital.com.au\/rosati\/greybox\/gb_styles.css\" rel=\"stylesheet\" type=\"text\/css\" \/><script type=\"text\/javascript\"> var GB_ROOT_DIR = \"greybox\/\";<\/script><script language=\"javascript\" src=\"https:\/\/sa-digital.com.au\/rosati\/greybox\/AJS.js\" type=\"text\/javascript\"><\/script><script type=\"text\/javascript\" language=\"javascript\" src=\"https:\/\/sa-digital.com.au\/rosati\/greybox\/AJS_fx.js\"><\/script><script type=\"text\/javascript\" language=\"javascript\" src=\"https:\/\/sa-digital.com.au\/rosati\/greybox\/gb_scripts.js\"><\/script>\n\t<link href=\"https:\/\/sa-digital.com.au\/rosati\/smsf_iframe_css\/iframe_style.css\" rel=\"Stylesheet\" type=\"text\/css\" \/><script type=\"text\/javascript\" src=\"https:\/\/sa-digital.com.au\/rosati\/smsf_iframe_js\/iframefunc.js\"><\/script><script src=\"smsf_iframe_js\/SB.js\" type=\"text\/javascript\"><\/script>\n<\/head>\n<body class=\"finance-home\" data-gr-ext-installed=\"\" data-new-gr-c-s-check-loaded=\"14.1098.0\"><!-- start page-wrapper -->\n<div class=\"page-wrapper\" id=\"home\"><!-- start preloader -->\n<div class=\"preloader\">\n<div><img decoding=\"async\" alt=\"\" src=\"https:\/\/sa-digital.com.au\/rosati\/assets\/images\/pre-loader.gif\" \/><\/div>\n<\/div>\n<!-- end preloader --><!-- Start header -->\n\n<header class=\"site-header finance-header\" id=\"header\">\n<div class=\"topbar\">\n<div class=\"container\"><!-- <div class=\"row\">\n <div class=\"col col-sm-6\">\n <ul class=\"contact-info\">\n <li><i class=\"fa fa-phone-square\"><\/i> Phone: +61 416 123 446<\/li>\n <li><i class=\"fa fa-clock-o\"><\/i> Mon - 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Plugins for this template --><script src=\"https:\/\/sa-digital.com.au\/rosati\/assets\/js\/moment.js\"><\/script><script src=\"https:\/\/sa-digital.com.au\/rosati\/assets\/js\/jquery-plugin-collection.js\"><\/script><!-- Google map api --><script src=\"https:\/\/maps.googleapis.com\/maps\/api\/js?key\"><\/script><!-- Custom script for this template --><script src=\"https:\/\/sa-digital.com.au\/rosati\/assets\/js\/script.js\"><\/script><\/body>\n<link href=\"https:\/\/sa-digital.com.au\/rosati\/greybox\/gb_styles.css\" rel=\"stylesheet\" type=\"text\/css\" \/><script type=\"text\/javascript\"> var GB_ROOT_DIR = \"greybox\/\";<\/script><script language=\"javascript\" src=\"https:\/\/sa-digital.com.au\/rosati\/greybox\/AJS.js\" type=\"text\/javascript\"><\/script><script type=\"text\/javascript\" language=\"javascript\" src=\"https:\/\/sa-digital.com.au\/rosati\/greybox\/AJS_fx.js\"><\/script><script type=\"text\/javascript\" language=\"javascript\" src=\"https:\/\/sa-digital.com.au\/rosati\/greybox\/gb_scripts.js\"><\/script>\n<link href=\"https:\/\/sa-digital.com.au\/rosati\/smsf_iframe_css\/iframe_style.css\" rel=\"Stylesheet\" type=\"text\/css\" \/><script type=\"text\/javascript\" src=\"https:\/\/sa-digital.com.au\/rosati\/smsf_iframe_js\/iframefunc.js\"><\/script><script src=\"https:\/\/sa-digital.com.au\/rosati\/smsf_iframe_js\/SB.js\" type=\"text\/javascript\"><\/script><grammarly-desktop-integration data-grammarly-shadow-root=\"true\"><\/grammarly-desktop-integration><\/html>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-9b32429 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"9b32429\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-66 elementor-top-column elementor-element elementor-element-857477c\" data-id=\"857477c\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-2ee2da6 elementor-widget elementor-widget-heading\" data-id=\"2ee2da6\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">Risks In SMSF's Renting Business Real Property To Related Parties<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-6726659 elementor-widget elementor-widget-text-editor\" data-id=\"6726659\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p><em>Titian Rosati – September 19, 2023<\/em><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-008d2a9 elementor-widget elementor-widget-text-editor\" data-id=\"008d2a9\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p><span style=\"color: #12334d;\"><strong>WHAT YOU NEED TO KNOW<br \/><\/strong><\/span>An area of concern, we continue to see SMSFs that do not have a lease agreement in place. Failing to have a lease agreement could be a compliance matter due to an often-forgotten requirement of section 71 of SISA.<\/p><p><span style=\"color: #12334d;\"><strong>REQUIREMENT TO HAVE AN ENFORCEABLE LEASE AGREEMENT<br \/><\/strong><\/span>As detailed in 71(1)(g) of SISA, a lease arrangement between an SMSF and a related party is only exempt from being an in-house asset if the property is business real property and the property is subject to a lease arrangement enforceable by legal proceedings. From an audit perspective, we cannot conclude a lease arrangement is enforceable by legal proceedings if no lease agreement can be provided.<\/p><p>Where no lease agreement exists, the property is classified as an in-house asset and, as it usually is a significant asset of the SMSF, a material compliance breach will have occurred. The trustees are then faced with the prospect of having to dispose of the property if the ATO does not accept that simply implementing a lease agreement meets the disposal requirement of section 82 of SISA.<\/p><p>Therefore, lease agreements with related parties must be documented at the beginning of the tenancy.<\/p><p>To assist your clients in meeting their compliance obligations with related party leases, we highlight the following points for your consideration:<\/p><p><strong><span style=\"color: #12334d;\">WHEN A LEASE ARRANGEMENT BETWEEN SMSF AND A RELATED PARTY COMMENCES<\/span><\/strong><\/p><ul><li>The trustee should obtain an independent expert opinion of the market value of the annual rental. This should include an evaluation of whether a rent-free period and additional charges for car parks are applicable.<\/li><li>A commercial lease agreement needs to be prepared, setting out the terms and conditions of the arrangement.<\/li><li>Details of outgoings should be documented within the agreement with these marked to market.<\/li><\/ul><p><span style=\"color: #12334d;\"><strong>DURING THE LEASE TERM<\/strong><\/span><\/p><ul><li>The trustee doesn\u2019t have to annually justify the commerciality of the lease arrangement to the SMSF auditor. For example, if the parties have entered into a 5-year lease agreement, the trustee wouldn\u2019t have to obtain a rental assessment until the lease needs to be renegotiated.<\/li><li>The trustee has to ensure the parties adhere to the lease agreement’s terms. This would include the correct rental amount being paid at the right time. Consistently short-paying or late-paying rental is not an arm\u2019s length dealing.<\/li><li>In good faith, alterations to the terms of the agreement during the lease term could be contemplated. However, variations must be justifiable and documented.<br \/><br \/><span style=\"color: #12334d;\"><strong>WE’RE HERE TO HELP!<br \/><\/strong><\/span>If you have any issues, questions or feedback regarding our monthly SMSF Bulletin or if you’d like clarification or further advice on the content of this month’s edition or any other SMSF audit concern – don’t hesitate to reach out to me at +61 416 123 446 or trosati@rosatiwang.com.<\/li><\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-993ff5a elementor-widget elementor-widget-heading\" data-id=\"993ff5a\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<p class=\"elementor-heading-title elementor-size-small\">Source: ATO Website<\/p>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t<div class=\"elementor-column elementor-col-33 elementor-top-column elementor-element elementor-element-5e9b427\" data-id=\"5e9b427\" data-element_type=\"column\" data-settings=\"{"background_background":"classic"}\">\n\t\t\t<div class=\"elementor-widget-wrap\">\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>ROSATI WANG Super – Self-managed superannuation fund audits Toggle navigation Home Workflow About Us Why Us Resources SMSF Byte Testimonials Contact Us Audit Dashboard Document Portal Risks In SMSF’s Renting Business Real Property To Related Parties Titian Rosati – September 19, 2023 WHAT YOU NEED TO KNOWAn area of concern, we continue to see SMSFs […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"blank","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-631","post","type-post","status-publish","format-standard","hentry","category-rosati-super"],"_links":{"self":[{"href":"https:\/\/rosatiwangsuper.com.au\/blog\/wp-json\/wp\/v2\/posts\/631","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/rosatiwangsuper.com.au\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/rosatiwangsuper.com.au\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/rosatiwangsuper.com.au\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/rosatiwangsuper.com.au\/blog\/wp-json\/wp\/v2\/comments?post=631"}],"version-history":[{"count":13,"href":"https:\/\/rosatiwangsuper.com.au\/blog\/wp-json\/wp\/v2\/posts\/631\/revisions"}],"predecessor-version":[{"id":690,"href":"https:\/\/rosatiwangsuper.com.au\/blog\/wp-json\/wp\/v2\/posts\/631\/revisions\/690"}],"wp:attachment":[{"href":"https:\/\/rosatiwangsuper.com.au\/blog\/wp-json\/wp\/v2\/media?parent=631"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/rosatiwangsuper.com.au\/blog\/wp-json\/wp\/v2\/categories?post=631"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/rosatiwangsuper.com.au\/blog\/wp-json\/wp\/v2\/tags?post=631"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}