When would the trustee of a SMSF consider a development agreement?
Once the trustee of a SMSF has satisfied itself that the acquisition and use of the development land is permitted under SISA and it is ready for commencement of the development of the land, the trustee must then consider who will develop it. Commonly another party (ie a developer who may be a related or unrelated party) will develop the land under a development agreement. This is often done to protect the SMSF from development risks and to ensure that the SMSF is not involved in a business. The preparation of a development agreement is recommended to ensure the trustee of the SMSF is dealing with the land on an arm’s length basis (as required under SISA), to ensure the interests of the SMSF are protected and to reduce the development risks to the SMSF. What should the development agreement provide? The development agreement will provide that the developer will engage all contractors and enter into all contracts (where these are not required to be entered into by the trustee of the SMSF
