The case of YPFD and Commissioner of Taxation 
AATA 9 provides some helpful insights for self-managed
superannuation fund (SMSF) trustees on the circumstances when their
residential properties may be considered 'business real
The relevance to SMSF trustees is that real estate owned
personally or by a related party generally cannot be transferred to
their SMSF unless the property is 'business real property'
(real estate used wholly and exclusively in a business). In
YPFD the Tribunal considered whether the applicant
taxpayer was in the business of letting residential rental
In this case, the taxpayer:
was employed full time as an industrial chemist;
owned nine rental properties with her husband;
spent a lot of time in connection with the properties,
including quarterly inspections;
was involved in advertising for tenants; and
was actively involved in managing the properties including
advertising for and sorting arrangements with new tenants,
arranging repairs etc. notwithstanding that they had appointed real
estate agents to manage the properties.
The Tribunal considered numerous indicia and concluded there was
a business, giving particular weight to the fact that the taxpayer
intended to make a profit, the extent of the taxpayer's active
involvement, her oversight and part management of the rental
properties and her intention to engage in the business of renting
properties regularly and routinely. The Tribunal reached this
conclusion even though the taxpayer:
had never made a profit from the rental business:
was not necessarily operating in a business-like manner;
had no written business plans.
The Tribunal also noted that some reliance on estate agents to
manage the properties did not necessarily mean the taxpayer was not
carrying on the business of letting rental properties.
SMSF trustees should exercise caution before acquiring
residential real estate from related parties in reliance on
YPFD, as determining whether a property is 'business
real property' involves a detailed analysis of all
circumstances and the facts in YPFD were quite
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Exemptions or concessions on stamp duty could apply when contemplating the purchase or transfer of NSW real estate.
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