Issue
Can a self managed superannuation fund (SMSF) acquire a tradable water right from a related party of a SMSF pursuant to subsection 66(2) of the Superannuation Industry (Supervision) Act 1993 (SISA)?
Decision
No, a SMSF cannot acquire a tradable water right from a related party of the superannuation fund pursuant to subsection 66(2) of the SISA.
Facts
A related party of a SMSF owns a tradable water right.
The SMSF wishes to acquire the tradable water right from the related party.
Reasons for Decision
Subsection 66(1) of the SISA expressly prohibits a superannuation fund from intentionally acquiring an asset from a related party of the fund unless an exception within subsection 66(2) of the SISA is satisfied.
Subsection 66(2) of the SISA provides the following exceptions to the general rule: ...listed securities acquired at market value; or if the fund is a superannuation fund with fewer than 5 members - the asset is business real property acquired at market value; or the trustee of a regulated superannuation fund acquired the asset under a merger between regulated superannuation funds; or the asset is of the kind which the Regulator, by written determination, determines may be acquired...
As the tradable water right does not meet the requirements of any of the exclusions provided by subsection 66(2) of the SISA it cannot be acquired from a related party.
It should be noted that subsection 66(2A) of the SISA may allow for the acquisition of the tradable water right where the asset is an in-house asset and its acquisition does not result in the level of in-house assets held by the fund exceeding the level permitted by Part 8 of the SISA.