Can I buy in partnership with SMSF

[jrc]

Looking at an IP, wondering if:

a. SMSF and I both put in funds and borrow the balance?; or
b. whether I put I money and own that percentage of the property, and the SMSF puts in money and borrows the balance?
c. or does it only work if the money I would put in is used as a contribution to the fund

I appreciate that if the SMSF borrows the property needs to be held by a bare trustee etc

Thanks

 

[Paul@PFI]

Not in partnership. You mean jointly. Yes. BUT there are lots of catches.

1. That property cant be used as loan security by you or the SMSF. No loan. Not now. Not later.
2. You can NEVER sell any of your share to the SMSF (s66 prohibits acquisition from a member or associate)
3. How do you operate a bank account ?? Your name fails. Its name may work but it cant hold money for you....Basic issue but a compliance concern.
4. Precise apportioning can be a concern. You cannot pay expenses then get fund to pay its share back. So each must pay its own share. However if you fail to pay it may be a joint / several liability for the fund. recourse !!
5. Some minor land tax issues at times.

A ungeared Unit Trust (SIS Reg 13.22 C & D) is the way to avoid many of these issues and as ownership "shifts" stamp duty may not result. First issue is the UT does NOT borrow but YOU (or wife) can borrow using other equity. That way your "share" of the trust can be negative geared and SMSFs share not.

Happy to talk offline. An ungeared UT can offer strategies to slowly shift ownership from joint to the SMSF being sold "owner" of entitelements. There are many catches but good strategies built around this structure since pre-1999. For example the UT cant own shares, borrow, lend etc.

Contribution strategies can be built aroudn a limited recourse facility, you can lend to the SMSF and also with an ungeared UT too. Personal advice is needed.

 

[Terry_w]

Consider a fixed unit trust with each of your owning the units. Property cannot be encumbered but you can graually get the units over to the SMSF as it builds up more capital.

 

[Redwood]

Looking at an IP, wondering if:

a. SMSF and I both put in funds and borrow the balance?; or
b. whether I put I money and own that percentage of the property, and the SMSF puts in money and borrows the balance?
c. or does it only work if the money I would put in is used as a contribution to the fund

I appreciate that if the SMSF borrows the property needs to be held by a bare trustee etc

Thanks

Hi jrc, as mentioned by the others, this is about strategy.

Will depend on the purchase price of the IP, your personal circumstances and of course, the SMSF investment strategy.

Consider perhaps a related party loan, or outright 80% resi loan through the SMSF, of course seek advice and ensure bare trust set up correctly and name on contract of sale is correct.

Cheers, Ivan