Hi Jayni
Thanks, I assume the land developer is not a related party. If the land developer was a related party then the loan would be an in-house asset and depending on the value of the loan the Fund may be in breach of the in-house asset rules (section 82 – 85 of SIS).
If the developer is not a related party as long as it is done on a commercial / arm’s length basis the Fund could lend money to the land developer and it could receive land in exchange for the loan.
The commercial / arm’s length requirement is covered by section 109 of SIS.
Other sections to consider are:
1) Section 62 – sole purpose test.
2) Section 65 – trustee cannot lend / provide financial assistance to a member / relative.
3) Regulation 4.09 – the investment transaction must comply with the Fund’s investment strategy.
You should also refer to SMSFRB 2020/1 – Self-managed superannuation funds and property development.
Thanks
SMSF AAA