Scary Stuff Using A Related Party Building For An SMSF

Here’s some scary stuff about using a related party building for an SMSF…

Even if you use an agency agreement you are still paying for the property installation after it has been installed. Once it is installed it is a fixture and as such it forms part of the property and is therefore an acquisition of real property from the related builder. Most certainly a standard building agreement would be a breach of the rules.

Paying in advance would not breach the acquisition of assets rule but then you would have an issue with NALE.

We have an issue that we must deal with on an arm’s length basis but if we do that we have a breach and if we don’t we have NALI.

Anyone wanting to do a related party build needs to prepare a contract and then apply for a PBR to ensure they haven’t breached or they might find themselves having to sell the asset out of the fund.

View article by SMSF Adviser ➡️ https://bit.ly/2LMbKYB