The government body has warned SMSF trustees to be cautious when making property investments, acknowledging that it can be a confusing sector for people who don't understand their obligations under the law.
"The finer details are important and trustees need to be sure that property is the right investment for their SMSF and that the arrangement is legal," ATO said in a recently released statement.
More common instances of incorrect property arrangements include holding trusts that have not been established at the time the contracts to acquire were signed and gearing in a related unit trust.
The ATO also cited instances where the title of the property is held in the individual's name rather than the trustee of the holding trust.
"Some of these arrangements, if structured incorrectly, cannot simply be restructured or rectified," the ATO said. "
"The only option may be to unwind the arrangement which could involve forced sale of assets at an inconvenient time. This could be very expensive for the fund with potential stamp duty and tax consequences."
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