13 Self-Managed Super Funds
Investment decisions and rules
Related party acquisitions
One of the more important investment rules prohibits an SMSF acquiring an asset from a member or related party unless it is one of the designated exceptions and is transferred at market value. Exceptions include:
- listed securities;
- units in a widely held trust (i.e. managed fund with 50 or more unit holders);
- business real property; and
- in-house assets that do not cause the 5% limit to be exceeded.
This restriction applies to assets that would be acquired through a purchase transaction as well as those acquired through an in-specie (non-cash) contribution. These restrictions do not apply to investments acquired from a 3rd party.
The same restrictions do not apply to transfers out of the fund. The SMSF can sell/transfer assets (on market terms) to members or related parties provided it is at commercial rates and does not breach preservation requirements.
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Example Naheed owns a residential investment property and shares listed on the ASX in her own name outside superannuation. She can sell the shares to her SMSF but not the investment property as it is not a business real property. Owning a residential investment property is not considered to be running a business. See below for a discussion of ‘business real property’. |
