What are you thoughts on doing a development within an SMSF? The situation could be like this.
An SMSF has acquired land suitable to build a duplex development. No borrowings are required for either the purchase of the land or the subsequent development. The potential for capital gain or rental return is extremely good.
The builder is as associated person (son-in-law) but not a member of the fund. The builder is needed to access a builders licence. Accounts will be setup with the various equipment suppliers such that the SMSF will pay for materials and contractors directly as much as possible.
The builder will either not be paid or will be paid well under market rates for managing the building process.
Some small costs will have to be paid by the builder and reimbursed from the SMSF at cost just from a practicality point of view. Also the builder will employ tradesmen (as employees) and will on-bill these to the SMSF at cost (i.e. wages + allowance for on-costs).
The SMSF was set-up specifically for this project (transfer in of funds from another SMSF) and is not registered for GST and is not required to be registered. All members in the SMSF are in pension phase.
The intent is to keep the units and receive rental income.
Any issues with this scenario?
Also if the on-going situation changed such that the SMSF sold one or more of the units within 5 years of completion, would GST have to be paid on the sale, and GST claimed back on expenses less the required increasing adjustment.
Could this concept be repeated.
An SMSF has acquired land suitable to build a duplex development. No borrowings are required for either the purchase of the land or the subsequent development. The potential for capital gain or rental return is extremely good.
The builder is as associated person (son-in-law) but not a member of the fund. The builder is needed to access a builders licence. Accounts will be setup with the various equipment suppliers such that the SMSF will pay for materials and contractors directly as much as possible.
The builder will either not be paid or will be paid well under market rates for managing the building process.
Some small costs will have to be paid by the builder and reimbursed from the SMSF at cost just from a practicality point of view. Also the builder will employ tradesmen (as employees) and will on-bill these to the SMSF at cost (i.e. wages + allowance for on-costs).
The SMSF was set-up specifically for this project (transfer in of funds from another SMSF) and is not registered for GST and is not required to be registered. All members in the SMSF are in pension phase.
The intent is to keep the units and receive rental income.
Any issues with this scenario?
Also if the on-going situation changed such that the SMSF sold one or more of the units within 5 years of completion, would GST have to be paid on the sale, and GST claimed back on expenses less the required increasing adjustment.
Could this concept be repeated.