An in-house asset is a loan to or an investment in a related party of your fund or an asset subject to a lease to a related party.
A related party of your fund can include fund members, trustees, their relatives and any companies and trusts these related parties control or influence. Employers who contribute member benefits for you or another member of your super fund are also related parties.
In-house assets can't be more than 5% of the total market value of your fund’s total assets.
If your SMSF holds an in-house asset, the value of all of your funds’ assets needs to be determined at the end of the income year. The valuation enables you to test whether the market value of the in-house assets exceed 5% of the funds’ total assets at the end of a year of income.
Certain events will affect the percentage of in-house assets and there are also some exceptions to the in-house asset rules. These include business real property that is leased between your fund and a related party of your fund, some investments in related non-geared trusts or companies and most investments and loans entered into before 11 August 1999.
Your SMSF must also ensure that the lease of business equipment or machinery complies with the sole purpose test and is made on a commercial ‘arm’s length’ basis.