DIY Super - Buying an IP

[Gordon Gekko]

Hi Guys,

I run my own DIY Super fund, where i have been investing mainly in the Stock Market and Managed funds and have been doing ok.

I was wondering if it is possible for my fund to invest in an IP??? I always thought it to be impossible because Super funds can't borrow money.

Any thoughts would be great.

cheers,

Gordon

[geoffw]

Have a look at the threads

http://www.somersoft.com/forums/showthread.php?t=16277
http://www.somersoft.com/forums/showthread.php?t=16409

[Gordon Gekko]

Thanks Geoff

I should have searched, will next time :)

GG

[geoffw]

No worries Gordon.

I posted those links just as a starting point. If they did not answer your question adequately, feel free to ask.

[Maverick]

Hi,

I have attended once a short seminar at Melbourne Property Investment Expo where they presented DIY Super Funds (i.e. SMSF). They have explained that SMSF can buy units in Unit Trust, say 30% of IP purchase price, with remaining money (70%) being contributed by the Trust. That way SMSF does not have to borrow money but will be entitled for the income distribution.
They have also mentioned Joint Venture option.

Regards.

[geoffw]

There is latitude for an SMSF to buy business property- see the draft circular on http://www.ato.gov.au/superprofessionals/content.asp?doc=/content/35919.htm

in particular- SMSF investments in non-geared companies or trusts that hold business real property
44. A SMSF can jointly invest with related parties in a company or trust that owns real property used for business purposes. The company or trust must meet the conditions specified in Division 13.3A of SISR for the SMSFs investment to be excluded from the in-house asset provisions. Regulations 13.22A to 13.22D of the SISR were made under subparagraph 71(1)(j)(ii) of SISA and therefore section 66(2A) allows a SMSF to acquire assets (in this case, shares or units) from a related party without contravening section 66.
45. What this effectively means is that a SMSF does not have to assume ownership of the business real property. Instead, the SMSF can invest jointly with related parties in a company or trust which owns business real property, provided the company or trust meets the conditions specified in Division 13.3A of the SISR.