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More to come on Aussiegolfa

Feb 20, 2019, 12:12 PM
Despite the ATO having issued their Decision Impact Statement on the Aussiegolfa case last year, there are still some loose ends that need to be addressed, according to a leading SMSF technical expert. 

SuperConcepts General Manager of Education and Technical Services, Peter Burgess referenced the case during the SMSFA National Conference in Melbourne: “The Aussiegolfa case was interesting because it was one of the very few cases that the ATO has lost on the topic of sole purpose,” he said.

“In simple terms Aussiegolfa involved a SMSF which acquired units in a related trust and the related trust acquired a residential property which was leased to a related party on commercial terms.

“The ATO concluded this was a breach of the in-house asset rules because the fund’s investment in the related trust exceeded 5 per cent of the fund value, and they also concluded that the fund had breached the sole purpose test because a related party was receiving a personal benefit which was not incidental.

“On appeal the Full Court agreed that the fund had breached the in-house asset rules but disagreed that the sole purpose test had been breached. In the court’s view the related party was not receiving a financial benefit because they were paying the same amount of rent as anyone else and any benefit they derived from renting the premise was purely incidental.

“However, late last year the ATO released a decision impact decision on the Aussiegolfa case and in that statement they said it would be wrong for SMSF trustees to assume that a super fund trustee can never contravene the sole purpose test when leasing an asset to a related party simply because market-value rent is received.

“If it can be shown that the leasing of that property to a third party has influenced the decision of the trustees to invest, then the ATO is likely to conclude that a collateral purpose exits and the sole purpose test has been breached. 

“For example, if the trustees amend their investment strategy to allow the fund to invest in such a structure it would be an indication that a collateral purpose exists.

“In my view there are two reason why we are still likely to hear more about this case; firstly, how do you apply the ATO’s decision impact statement to business real property where clearly the ability to lease the property back to a related party has influenced the trustee’s decision to invest.

“And secondly, the full court stated that there was a difference between motive and purpose and while the trustee’s motive may have been to invest in a unit trust which leases a property to a related party on commercial terms, the purpose of the fund may still be to provide retirement benefits to members,” Mr Burgess said.

Media contact: 
Garth Montgomery
0408 864 851