Could a super fund pay for a Granny Flat on a PPOR ?

I'm assuming the answer is no , but no harm in asking

Our PPOR is on a corner block and we're planning on putting a Granny Flat in part of the back yard .

We have the funds in an LOC to fund it , however in our names , income will get taxed at the top marginal rate .

Our Super fund has cash aplenty at the moment and we're in transition to retirement so income is obviously taxed at a lower rate .

Could the super fund take a lease on part of the land , construct a Granny flat ?

Any creative suggestions ?

@Terry_w ?

Cliff

 

no

 

Thought so

Cliff

 

@Terry_w
Boom!
Short and sweet

 

My Irish logic would have said as long as it's at least an arm's length from your PPOR

 

Council setbacks would have been higher than that anyways

 

I've always wondered why they used that term "arms length"
Some people might take it quite literally, haha.

 

Though this wouldn’t be at arms length .....

We need to do it attached using our son’s bedroom as either a bed room or living area .

We did think about doing while he’s overseas , but he’ll be back before we can start ...

Cliff

 

A GF is merely a item of construction that sits on land. If it was situated on the members land the title then poses a serious concern for use of the fund and breach of the sole purpose test. Even if the fund received all rents I consider it a problem since the rent relates to a mixed use - Member land and fund asset. There could be ways to structure this and provide the fund with security and a lease but as its a related party it would be problematic. The member/s would be paying for a share of expenses that the fund should incur (eg share of rates etc).

I wouldnt go near this type of arrangement. The arms length bit isnt so much the concern. Arms length requirements for super deal really only with excessive income as a tax problem. The fund receiving all the rent could be held to be excessive non-arms length income since the fund hasnt incurred a CGT liability or a share of rates etc. There are other issues more problematic. Eg : Since to fund asset sits on members land there is a "use" of the fund assets breaching sole purpose but perhaps a lease could be undertaken. One of the simplest problems is who cleans it. or uses it for one night while its vacant etc.

Ask yourself this - Why not do same in your neighbours back yard ? What would your neighbour expect in rent for surrendur of rights to their yard and covering a share of all costs incl CGT ? Exceptionally difficult to address. High chance of a qualified audit opinion and ATO wouldnt see it positively.

You could propose the concept to the ATO and seek a SMSF ruling. Good luck with getting it issued. I reckon they would refuse (or just ignore the request). It would be considered refused after 28 days. There would be a public interest reason to avoid everyone doing it

 

what if the granny flat was the mobile type and not affixed to the land ?

i know the answer already

 

I have been asked a few times if a SMSF can buy a RV. Technically yes it can provided its insured and not kept on members land or used by family etc and you lease it out (websites exist !!) and then when members retire it provides retirement benefits. And provided the deed permits that sort of investmnet....It may need to be amended to include unusual things like a mobile caravan etc But leased RVs can get a lot of abuse and need ongoing mechanical work (how do you drive it to the mechanics and not breach sole purpose ? so by time you go to use it you have a old RV with costly work needed. And does CGT apply ? No. But then assuming you can make a profit on a depreciating RV is not really likely. Wasting assets need to produce a fair income to offset the loss of value.

People often forget one of the fundamental aspects of a super fund is providing retirement and death benefits. These benefits dont have to be money. SIS doesnt mention money other than on death when benefits may need to be cashed. A SMSF can own a future retirement home, a prepaid funeral for members and even a caravan / RV if the right rules are followed.

Its the sort of area where a ruling from the ATO may be wise so you dont get accused of a breach later. A SMSF that owns a mobile caravan that it parks on a beachfront site (it leases) and rents would expect a certain level of attention and proof that it is never used privately may be hard to produce. And some van parks may have issues with "sublet" sites.

 

A friend purchased acreage via his SMSF for their horses which had a house on it, they moved into the house but somehow kept this separate from the rest of the land (8-10 acres) ?

Recently they rented out the acreage& house and moved themselves and the horses next door onto a larger property for the horses which is obviously a lot 'cleaner' from the SMSF point of view

 

This is legally possible - under certain conditions.

 

Horse breeding yes. Horse racing business yes. Horses for riding etc no.
The property USE must meet business real property use test

 

What about guinea pig racing ?

 

As long as it meets the defn of Business Real Property its ok (2009/1)

Cheers Ivan

 

Mmmm.. kfc of the south americans