A recent ruling from the Australian Taxation Office (ATO) has confirmed a self-managed superannuation fund (SMSF) can carry on a business subject to certain conditions being met.
The ATO ruling dispels the long-held belief among SMSF members and advisers that this type of activity was not available for superannuation funds.
“We’ve got the commissioner now saying we can run a business provided you give ticks to all of the other regulatory provisions that are found inside the SIS (Superannuation Industry Supervision) Act,” SMSF Strategies principal Grant Abbott told delegates attending the 2010 SMSF Strategy Day in Perth.
The key to this ruling stems from the fact that when the ATO examines whether an SMSF is contravening the regulatory provisions in running a business it concentrates on the activities of the trustees and not whether a business can be carried on.
“So the commissioner looks at the activities and doesn’t look at the business. And what he looks at is: ‘does that activity breach the sole purpose test and does that activity or transactions that are catered for in that business breach the in-house assets test?’,” Abbott said.
Outside of the SIS Act, SMSF trustees must also review their trust deeds before they decide to include the activity of running a business within their funds.
“A self-managed super fund may not be permitted by trust law to carry on a business if its trust deed does not empower it to do so. I’d say around 60 to 70 per cent of the deeds I see don’t allow a super fund to carry on a business,” Abbott said.
“The sole purpose test has never ever said you can’t run a business, it’s just been myth created by a number of people.”
