SMSF Commercial Lease fails ATO scrutiny
An accountant shows me a non-complying self-managed super fund. It owns commercial property. Its blemish? It does not have a correctly drafted SMSF commercial lease. It was a good lease. But it did not address the requirements of the SIS legislation. It failed the ATO audit.
Your SMSF Commercial Lease Agreement must comply with Australian Superannuation law. If your SMSF is noncompliant, the ATO applies penalties and additional taxes.
SMSFs require specialist leases. The commercial lease should be subservient to the Superannuation rules. It is not enough to use a standard commercial lease. Legal Consolidated’s SMSF commercial lease fully complies with the SIS Legislation.
Our SMSF Commercial Lease is designed for SMSFs. What if your SMSF is leasing the commercial property to a non-related party? It is still essential that the Lease complies with the SIS Legislation. For example, the Retail Shops Act and other Acts are subservient to the SIS Act and Regulations.
Extra issues when leasing to a member
There are additional challenges when leasing to a member. For example:
1. Member gains an advantage. For example, the rent charged by the SMSF is too low. A member illegally gains an advantage.
2. Member gives an advantage to the SMSF. For example, the rent is too high. Therefore, the member illegally injects funds into the SMSF. This is a contribution by the member or a ‘related person’.
‘Related people’ include:
* associates of members
* relatives of members
* business partners and their spouse and children
* trusts controlled by members or associates
* companies controlled by members or associates
The ATO watches ‘related party’ transactions closely.
The lease between the SMSF and member must, therefore, be at arm’s length. The SMSF cannot give ‘special treatment’ to a related party in the commercial lease. The trustee cannot give ‘favours’ to the leasing member.
You must have:
1. a legally prepared and legally enforceable written lease agreement – designed for the SIS legislation
2. rent paid on time as required by the commercial Lease Agreement
3. the SMSF taking appropriate action to remedy breaches
There are many SMSF rules. We follow them all.
Our firm’s Commercial Lease Agreement complies with up-to-date Superannuation law, including:
* Superannuation Industry (Supervision) Act 1993
* Superannuation Legislation (Consequential Amendments and Transitional Provisions) Act 2011
* Superannuation (Financial Assistance funding) Levy Act 1993
* Superannuation (Resolution of Complaints) Act 1993
* Superannuation (Rolled-Over Benefits) Levy Act 1993
* Superannuation Industry (Supervision) Consequential Amendments Act 1993
* Superannuation Supervisory Levy Amendment Act 1993
* Occupational Superannuation Standards Amendment Act 1993
* Superannuation Act 2005
* Superannuation Act 1990
* the Superannuation Act 1976
* Superannuation (Productivity Benefit) Act 1998
* Superannuation Benefits (Supervisory Mechanisms) Act 1990
* Superannuation (Family Law – Superannuation Act 1922) Orders 2004
* Superannuation (Family Law – Superannuation Act 1976) Orders 2004
* Superannuation Guarantee (Administration) Act 1992
* Superannuation Industry (Supervision) Regulations 1994
SMSF auditors require a copy of the lease before signing the yearly audit.
Our law firm’s SMSF commercial lease complies with the Superannuation laws. It improves compliance. We make the auditor and ATO auditor happy (well as much as they can be).
For more advice please telephone us.
Adjunct Professor, Dr Brett Davies, CTA, AIAMA, BJuris, LLB, Dip Ed, BArts(Hons), LLM, MBA, SJD
Legal Consolidated Barristers and Solicitors
Australia wide law firm
Mobile: 0477 796 959
National: 1800 141 612
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