Can an SMSF Buy a Farm from a Related Party?

An SMSF can buy a farm from a related party, but it must comply with the rules and regulations set out by the Australian Taxation Office (ATO) to ensure compliance with superannuation laws. The purchase of assets from related parties is generally prohibited under superannuation law to prevent members from using their SMSFs to benefit themselves or their relatives at the expense of the fund’s retirement savings.

However, there are some exceptions to this rule. For example, an SMSF can purchase business real property from a related party if the purchase is made at market value and the property is used in the business of the fund or a related party. The definition of business real property includes land and buildings used wholly and exclusively in one or more businesses.

If the farm is business real property and the purchase price is at market value, an SMSF can buy it from a related party. However, the SMSF must ensure that the transaction is documented in writing and that accurate records are kept of all transactions related to the investment. Additionally, the SMSF must ensure that the purchase is in line with the fund’s investment strategy and trust deed, and that it complies with the superannuation laws and regulations.

At iCare Super, we can help you navigate the complexities of buying a farm from a related party through an SMSF. Our team of qualified SMSF auditors, accountants, and financial advisers can provide professional advice and guidance to ensure that your SMSF stays compliant with all legal and regulatory requirements.

When purchasing a farm from a related party, it is important to keep in mind that the ATO may scrutinize the transaction more closely than usual to ensure that it is not a breach of superannuation laws. It is essential to obtain an independent valuation of the property to ensure that the purchase price is at market value. The SMSF must also ensure that the transaction is conducted on an arms-length basis, meaning that the terms and conditions of the transaction are similar to those that would be agreed upon between unrelated parties.

At iCare Super, we can assist you in determining whether the purchase of a farm from a related party is in line with your SMSF’s investment strategy and risk profile. We can also help you ensure that the transaction is fully documented, and that all legal and regulatory requirements are met.

If you are considering purchasing a farm from a related party through your SMSF, contact us today to learn more about how we can help you. We can provide you with the guidance and support you need to make informed decisions about your SMSF investments and ensure that your retirement savings are protected.