property in super

ATO says no to buying property to live in with super

The ATO warns people could lose up to half of their super if they break rules by buying property with their retirement savings to live in.

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The Australian Tax Office has slammed media reports that claim it’s okay to buy property with super savings to live in.

In response to enquiries made by Financy, the ATO has this morning released a statement confirming that it’s not loosening the rules and warned that anyone caught breaking superannuation law risks losing up to half of their retirement savings in penalties. reported last week in this article that the ATO may be about to relax the rules around buying property within self managed super funds.

The news report cited property investment firm DomaCom, which claimed that it had received advice from the ATO which suggested self managed super funds would not be in breach of the rules if they bought property and allowed a related person to live in that property, as long as the super fund owned less than 50 per cent of that property.

The report follows calls for younger Australians to be able to use their superannuation savings to buy property given higher house prices in popular city areas.

But ATO Assistant Commissioner Kasey Macfarlane says the ATO has no intention of changing the rules.

“The ATO does not condone and will take serious action with respect to any promotion of SMSF investments as a means for providing present day benefits for members, their relatives or other related parties. This includes the provision of residential accommodation to related parties such as children of SMSF members.

“Contrary to statements made in the media, the ATO is not considering the allowing broader use of SMSF assets beyond the sole purpose of providing retirement benefits for members or benefits for their dependents upon death,” says Ms Macfarlane.

“Ensuring SMSFs are established and maintained for the sole purpose of providing retirement benefits for members and benefits to their dependents on death, as well as ensuring compliance with the regulatory requirements and restrictions that apply to SMSFs, is paramount to the ATO’s role as the regulator of SMSFs.

“The use of SMSF property investments as a means of providing residential accommodation to SMSF members’ children and other related parties contravenes the requirement that an SMSF be established and maintained for the sole purpose of providing retirement benefits for members or benefits for their dependents upon death.

“The use of any SMSF investment as a means for providing a present day benefit for members also directly contravenes other superannuation regulatory rules and restrictions that apply to SMSF investments.”

Breaching the superannuation laws carries serious consequences such as significant administrative penalties and the loss of the ability of individuals to manage their retirement savings because they are disqualified as a trustee.

“In the most serious cases, individuals can possibly lose up to almost half of their retirement nest egg because their SMSF is declared non-complying,” says Ms Macfarlane.

“I would urge SMSF trustees uncertain about the regulatory restrictions applying to any investments that they have undertaken or are planning to undertake in their fund to seek independent professional advice or contact the ATO.”

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