Yes, you can sell an asset to your super fund for $1

You will have often heard about the need for super funds to conduct all dealings with related parties at 'arm’s length'.

Most people think this means your SMSF must deal with EVERY other party at arm’s length, which basically means you need to make sure all transactions are done at market rates. Now, if you apply the arm’s length rule to all your transactions, you’ll never get into trouble. But by understanding how the arm's length rule works, you will realise that you don't need to apply it in every situation.

Cheap as chips

For example, suppose my self-managed super fund (SMSF) decides to purchase an asset I personally own, like a business property (it will need to be an asset that you are allowed to sell to the fund). In this case, most people assume that my super fund has to acquire this asset for the same price that I would obtain from someone I didn’t know – that is, at market rates. But it doesn't. Theoretically, I could sell a business property to my fund for $1 if I wanted to. I could also lend my fund money at 0.1% to buy a house too, as long as that house isn't owned by a related party. Now doing so will be hard and not necessarily in your best interest, but it's not against the super law. I'll explain why.