Question: We are considering purchasing a farm on which we would live (residential area less than two hectares) and would require 10% of the purchase price to be funded by our SMSF and 90% by ourselves (part cash and part debt). We would pay rent to our SMSF at market rates for the 10% of the land. Would this be allowable? We will be running a primary production business as recognised by the ATO.
Answer: Thanks for the question.
As you’re running a genuine business then it would seem that the super fund would own business real property, which it can lease to a related party.
You will want to make sure the super fund’s interest in the property is very clear on the property’s title. Also, you should make sure the lease agreement between the super fund and yourselves is a good arm’s length agreement that doesn’t give you, as farmers, anything over and above what a third party would receive. You can read more about arm’s length transactions here.
If you wanted to be really careful, you should consider getting an ATO SMSF specific advice about your circumstances.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.