Hi CV
I have been involved in a similar breach and in that example the property was sold on market to the public to rectify the breach. The Fund made a capital loss in that example as the property sold at a lower value and all acquisition costs were not repaid to the SMSF.
My view is that the property should be sold at market value either back to the members or to the public. The SIS legislation does not prescribe how the breach should be rectified. As a result there is no requirement for the Fund to be refunded all of the acquisition costs. The trustees of the Fund are in breach of the SIS legislation and as a result the Fund incurs buying and selling costs that arguably should be paid for by the Fund.
If other forum members have a view please let the forum know.
Thanks
The Auditors Institute