What’s often overlooked is that the definition of ‘business real property’ under sub-section 66(5) of the SIS Act and ‘residential premises’ under section 195-1 of the GST Act is quite different.

If a residential property is being used solely for business purposes – a doctor’s surgery or real estate agents’ office for example – then SIS regards this as business real property so it can be acquired from, or tenanted by, a related party.

For GST purposes, because the property is capable of being occupied as a residence, or for residential accommodation, it is treated as ‘residential premises’ so, where the SMSF is registered for GST:

·        There is no GST applicable to the purchase or sale of the property; and

·        There is no GST applicable to the rental income in respect of the property.

The rental income from the property would also not be included in the GST turnover test which means that GST should not be included in the rent.

There will have, undoubtedly, been instances where such a property has been treated as commercial premises, for GST purposes, simply because it has been regarded as business real property under SIS.

For this, and other insights, you might like to attend my session titled “Nearly 20 Years of LRBAs: Lessons, Compliance and Practical Insights for Today’s SMSF Adviser” on the last day of the SMSF Association Conference in Adelaide this week.