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Can your trade business do discounted work on your SMSF property?
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Overview
Before your trade business gives your SMSF a discount on property work, find out what an unrelated customer would pay. The difference can affect the tax on the fund’s rental income.
Why a discount can affect the rent
You run an electrical business. Your self-managed super fund owns a tenanted workshop that needs rewiring. Sending your crew around at cost sounds like an easy way to help your retirement savings. Before booking the job, check what an unrelated electrician would charge and in what capacity you’ll be doing the work.
Super law and tax law both care about dealings between a fund and people connected to it. Under the tax rules, a fund that pays less than an arm’s length amount for a service connected to a particular asset can have income from that asset treated as non-arm’s length income (NALI). That income can be taxed at the top rate. The tax exposure may be much larger than the discount on the job.
Ordinary unpaid trustee tasks, such as organising a quote or reviewing fund records, are different from delivering a professional electrical service. A licence, business insurance, staff and trade equipment can all point to you acting in your business capacity. Also check whether trustee remuneration rules allow the proposed payment before the work goes ahead.
Keep the evidence a customer would expect
Write down the scope, collect a comparable quote and keep the invoice and proof of payment from the fund. If you’re offering a discount genuinely available to unrelated customers, keep evidence of who qualifies and how consistently your business applies it.
