Development of vacant land

The Draft Ruling however maintains that the development of a vacant block of land will not constitute a single asset.  The development will cause the nature of the property to be fundamentally changed thereby transforming the asset.

Consequently, an SMSF trustee cannot develop vacant land which has been acquired by a limited recourse borrowing arrangement.  It is irrelevant whether the cost of the redevelopment is financed by the fund’s own resources or by borrowed monies.  Once the borrowing on the vacant land has been paid off (and the title transferred to the SMSF trustee), the SMSF trustee could, using its own monies, redevelop the property.