DomaCom concludes Federal Court action

Federal Court proceedings supported by DomaCom have concluded, allowing  an SMSF to invest in DomaCom's fund even if  a related party is a tenant in the underlying property.

Last month, the Federal Court found that the sole purpose test was not breached when a related party of an SMSF rented a Burwood property held by the DomaCom fund.

The Court said the primary judge's decision was incorrect in concluding that the leasing of the residential property held by the sub-fund to a child of a member of the Benson Family Superannuation Fund was a breach of the sole purpose test.

Commenting on the decision, DomaCom chief executive Arthur Naoumidis said the SMSF property solution provider was pleased with the court's decision, which represents a milestone for the SMSF industry.

DomaCom said the Australian Tax Office had until 7 September 2018 to appeal the High Court's decision.

"Our lawyers have advised no such appeal or application for an extension of time has been filed," DomaCom said in a statement.

Other orders issued by the Federal Court included a declaration is to be made stating leasing the Burwood property by the DomaCom Fund would not cause Aussiegolfa (trustee of the Benson Fund) to breach the sole purpose test set out in section 62 of the Superannuation Industry (Supervision) Act.

Aussiegolfa must pay 40% of the ATO's costs incurred from the first proceeding and the appeal respectively.

In relation to the Administrative Appeals Tribunal Appeal, the Court ordered the ATO pay 100% of Aussiegolfa's cost of the appeal.

DomaCom said it is calculating the costs and will announce the net payment in due course if it is material.

Naoumidis said: "DomaCom will now focus on addressing the related trust matter and is reviewing our constitution and disclosure documents to address this issue with respect to future sub-funds."

The ASX-listed firm began supporting a Federal Court action in June 2017, appealing for its sub-funds not to be considered in-house assets or related trusts under the SIS (Superannuation Industry Supervision) Act.

The exemption would mean SMSF investors with the ASX-listed fractional investment fund manager would be able to invest in property sub-funds in which the tenant of the underlying property is in some way a related party of the SMSF.

Read more: DomaComSMSFAussiegolfaArthur Naoumidis
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