Television Education Network

TEN

SMSFs (self managed superannuation funds) have been carrying on property development activities ever since SMSFs came into existence. Yet despite that there is still a common concern that such activities will cause the SMSF to become non-compliant, or subject to penalties, on the basis that such activities, and in particular undertaking a property development business, are prohibited.

There is no express prohibition on SMSFs undertaking property development activities or a property development business. Rather, the question is whether such activities cause the SMSF to breach the provisions of the Superannuation Industry (Supervision) Act 1993 (SIS Act) or the Superannuation Industry (Supervision) Regulations 1994 (SIS Regs) or adverse tax consequences under the Income Tax Assessment Act 1997 (ITAA97) or the Income Tax Assessment Act 1936 (ITAA36).

In this paper I have firstly examined whether an SMSF can carry on a business. Secondly, I have reviewed the provisions of the SIS Act and SIS Regs, and the tax acts, that must be considered when an SMSF carries on property development activities. Thirdly, I have reviewed various structures under which an SMSF can carry out property development. Finally, I have examined issues arising out the use of related party builders when undertaking property developments.