Transferring a residential property into your SMSF that you or a related party of your SMSF already own is prohibited under superannuation law. However, commercial property may be exempt, depending on individual circumstances. If appropriate, this can be a great decision for business owners who have their own SMSF.
Before you decide whether this is appropriate for you, the following questions must be answered.
Is your SMSF allowed to acquire the property?
Residential investment properties owned by a SMSF member (or a related party) cannot be acquired by an SMSF. An exemption applies if the property is one that is used entirely for business purposes. – it must be current used by at least one (1) or more businesses. These businesses may or may not include a business owned or run by a member of the SMSF.
Specific rules apply to the definition of Commercial Property so speak to us to ensure the property is within the definition.
Is the property an appropriate investment by the trustees of your SMSF?
- Does your SMSF have the funds to pay for ongoing expenses related to the property? And if your SMSF has to borrow to acquire the property, will the SMSF be able to meet ongoing loan repayments?
- Is the property within with your SMSF’s investment strategy?
- Will acquiring the property cause the SMSFs investment portfolio top become unbalanced?*
We can arrange for one of our Industry Alliance partners to discuss these aspects with you.
How do I transfer property into my SMSF?
The transfer can be done:
- as a personal contribution;
- by selling the property to the fund;
- or a mixture of both.
But there are few things you need to consider.
First of all, you can usually only contribute a certain amount (in non-concessional contributions) into super every three years.* If the market value of your property is worth more than the allowable contribution, you can only transfer part of the value of the property as a contribution.
Alternatively, the property could be sold to your SMSF at market value. The SMSF may also be able to borrow against the property to finance the purchase of the property. But there are specific rules and restrictions that need to be followed.
What costs are involved with transferring a property into my SMSF?
In general the following costs need to be taken into account:
State transfer duty – Different states have different rules, but in NSW transfer duty is minimal provided the correct process is followed. You should discuss this aspect with us.
Capital gains tax – this may or may not apply depending on when the property was originally acquired.
There could be ways to reduce or even eliminate having to pay CGT.
We can arrange for one of our Industry Alliance partners to discuss this aspect with you.
Professional advice costs – You will need a Financial Adviser as well as legal advice to ensure the transfer of your property into your SMSF is correctly carried out.
Is it for me?
As everyone’s circumstances are different, you should talk to us about your individual situation.
There is no such thing as a ‘one size fits all’.
We will guide you through the process from providing initial advice about whether or not your SMSF is in a position to take on the property. If you don’t yet have an SMSF we will set this up for you, including all ATO and ASIC requirements being met.
We (together with our industry alliance partners) will take you through the whole process.
Accounting and administration
It is crucial that your SMSF complies with its ongoing tax and administration obligations. We will advise you as to what is required in this area and happily arrange one of our Industry Alliance Partners to assist, ensuring you never fall foul of ASIC or the ATO.
*Please note we do not provide financial, accounting or tax advice, rather we work with trusted industry professionals in these areas.