Business real property means “land and any structures that form part of the land because they are permanently fixed to that land”.

“If there are any other separate assets included in the contract, then they are not going to come under the business real property exemption, and as a result, you can't acquire it from a related party,” he said.

“Even if we were acquiring a commercial property from an unrelated party, we still need to be careful. If the purchase contract included some additional assets that did not form part of the property, the fund could acquire them.

“However, if the fund then leased them to a related party they would be considered an in-house asset and would be subject to the 5 per cent in-house asset limit.”

He explained examples of this are when a contract includes items such as office furniture and dishwashers, temporary demountable structures and other plant and equipment. These assets will generally not form part of the property and therefore cannot be included under any business real property exemptions.

“It’s important to have a good understanding of what it is you're purchasing, what meets the definition of business real property, and what is the separate asset that needs to be dealt with separately,” Day said.

“Those assets that don't form part of the property should be excluded from the contract and not paid for by the super fund, so that you don't end up with any acquisition or in-house asset issues.”

There are several other common mistakes SMSFs make regarding business real property, Day said.

“One is just assuming you're running a business and therefore your property qualifies as a business real property.”

“An interesting example that we’ve seen increasingly over the last 10-15 years is people who make their residential property available for short-term holiday accommodation via a peer-to-peer booking platform such as Airbnb. Suddenly, they think they are running a business of providing short-term holiday accommodation and therefore their residential property qualifies as business real property.”

Whether someone is running a business will be based on a whole range of factors as outlined in TR 97/11, including the size and scale of the operations. So, while it’s possible that a residential property used in such a way could qualify as a business real property, you are generally going to need to own a lot more than just one or two – and even then it will depend on the circumstances.

“You also need to be careful with any personal use as it could cause the property to fail the business real property definition unless it’s incidental and relevant to the business being carried on,” Day said.

“For example, the ruling gives an example of a 24-hour motel manager being able to live onsite without causing the property to fail the definition. However, that doesn’t mean anyone can just go and move into the property because it's being used to run a business. Unless I need to live onsite as part of operating that type of business, any private use of the property that was more than just minor or trifling would likely cause the property to fail the business real property definition and result in a breach.”