SMSF update from the ATO

In a recent speech, Alison Lendon, Deputy Commissioner Superannuation, spoke to a number of issues that affect super funds and their trustees and advisers. The following are excerpts:

Applying to the ATO for advice

If trustees of superannuation funds want a written explanation of the ATO’s view on how the super laws apply to their SMSF, they can apply for ‘SMSF specific advice’.

While this advice isn’t legally binding, it will provide certainty to trustees about the application of the super laws to their fund, and the fact that trustees acted in accordance with the advice would be an important factor in their favour. We can assist with this application process.

The most common topics the ATO is asked about for specific advice are:

  • confirming when a property meets the requirements to be ‘business real property’, and working through the acquisition of business real property from related parties;
  • understanding the limitations of investing in related unit trusts;
  • what’s an ‘improvement’ or a ‘repair’ to property acquired under a limited recourse borrowing arrangement (LRBA);
  • the acquisition of assets from related parties and low-interest loans for LRBAs; and
  • requests about collectable and personal use assets since specific requirements regarding their storage and usage were introduced in 2011, especially regarding insurance and gold bullion.

Related party transfers

From 1 July 2013, new legislation will broaden the types of assets currently prohibited from being acquired from a related party, but will also provide more transparent exceptions whereby acquisitions will be permissible.

By way of example, the acquisition of ‘business real property’ will be prohibited unless acquired at market value as determined by a qualified independent valuer. Similarly, listed securities acquired from a related party will also be prohibited unless they are acquired in a way that is prescribed under the regulations. The legislation will also introduce a prohibition on the disposal of SMSF assets to a related party, unless similar exceptions are satisfied.

What kind of expenses am I expected to incur when entering into a Retail Lease?

We get this question a lot and it’s a tough one to answer! Not because we can’t – it’s just difficult to answer such a general question. There is no hard and fast answer to this question as it will depend on a large number of factors. In addition to rent, there are all sorts of costs that you would have to incur when you enter into a Retail Lease. These are both ongoing or one-off. Generally however you would incur the following outgoings:

  • Rent
  • Water Rates
  • Local Council Rates
  • Land Tax
  • Electricity Rates
  • Local Council Parking Levies (if premises offer council parking)
  • Local Council Outdoor Seating License (if premises have outdoor seating)
  • Public Liability Insurance
  • Glass Replacement Insurance
  • Building Administrative and Maintenance Fees(if premises is part of strata)
  • Marketing Fees (if premises is part of a larger shopping complex)

Outgoings will change depending on:

  • Floor space
  • Location
  • Value of the premises
  • Equipment on the premises
  • What you are doing

The above is a non-exhaustive list of matters. As stated there is no hard and fast answer to “what is expected” and “how much” it is expected to cost as these matters will change depending on where you want to lease. This is a matter for homework and you’ll likely get these answers once you’ve properly investigated the location of where you want to lease. But this isn’t a chicken and egg dilemma – in NSW the Retail Leases Act says that the landlord of retail premises must issue a “disclosure statement” to all potential lessees that sets out what these costs are before the lessee enters into the lease agreement.

Retail Leases can be complex – if you are entering into one, give us a call and we’ll guide you through the process and assist you with your transaction.