Commercial property and SMSF

Looking to purchase an off the plan commercial property in a SMSF. SMSF already has enough for the deposit. When the building is finished, it is likely the fund will need to borrow. Currently the SMSF is setup as a corporate trustee so
"ABC Pty Ltd in trustee of ABC". ABC is name of the SMSF

Just had some question.

When I sign the contract, do I list the purchaser as "ABC Pty Ltd in trustee of ABC" or "ABC Pty Ltd" or "ABC".

Given the fund will need to borrow money and a bare trust set up to temporarly hold the property, does this bare trust need to be established now and included as the purchaser.

Many thanks
 
Looking to purchase an off the plan commercial property in a SMSF. SMSF already has enough for the deposit. When the building is finished, it is likely the fund will need to borrow. Currently the SMSF is setup as a corporate trustee so
"ABC Pty Ltd in trustee of ABC". ABC is name of the SMSF

Just had some question.

When I sign the contract, do I list the purchaser as "ABC Pty Ltd in trustee of ABC" or "ABC Pty Ltd" or "ABC".

Given the fund will need to borrow money and a bare trust set up to temporarly hold the property, does this bare trust need to be established now and included as the purchaser.

Many thanks

Sounds like you need a lawyer!
 
have just been through this exercise with a medical centre with a client of ours

Oh what a mess, and a costly experience, construction SMSF, and commercial are not the best of friends.

Even though the end result is sensational, the added costs and complications along the way really do hurt

as Terry has said seek legal and financial advice specific to this purpose

thanks

Rolf
 
Waiting to speak to a lawyer. Accountant has pointed me to a draft ruling from the ATO regarding something like this - SMSFR 2011/D1.

In particular it uses an example of an off the plan apartment where the deposit is paid for out of smsf funds with the limited recourse borrowing arrangement only set up after construction has completed.

It seems the draft ruling is favourable but not final. What are the chances of the final ruling doing a 180 degrees on this?
 
Waiting to speak to a lawyer. Accountant has pointed me to a draft ruling from the ATO regarding something like this - SMSFR 2011/D1.

In particular it uses an example of an off the plan apartment where the deposit is paid for out of smsf funds with the limited recourse borrowing arrangement only set up after construction has completed.

It seems the draft ruling is favourable but not final. What are the chances of the final ruling doing a 180 degrees on this?

What you really need to be concerned with is stamp duty - if you get the names on the contract wrong then you may be up for double duty.
 
Given the fund will need to borrow money and a bare trust set up to temporarly hold the property, does this bare trust need to be established now and included as the purchaser.

Many thanks

Simple answer is yep but as others have said get it wrong and your in trouble.
 
Thanks all,

Sounds a lot more complicated than first thought mainly due to the fact that it is off the plan and requires LRBA.

What about if I purchase in my own name and once the building is completed and strata titles are issued, I sell to my SMSF. The main issues I see are stamp duty and CGT. In some states including NSW seems like stamp duty is only nominal ($50) and unlikely to have much if any CGT if selling straight after construction.
 
Thanks all,

Sounds a lot more complicated than first thought mainly due to the fact that it is off the plan and requires LRBA.

What about if I purchase in my own name and once the building is completed and strata titles are issued, I sell to my SMSF. The main issues I see are stamp duty and CGT. In some states including NSW seems like stamp duty is only nominal ($50) and unlikely to have much if any CGT if selling straight after construction.

A SMSF cannot buy residential property from a member.
 
Thanks all,

Sounds a lot more complicated than first thought mainly due to the fact that it is off the plan and requires LRBA.

What about if I purchase in my own name and once the building is completed and strata titles are issued, I sell to my SMSF. The main issues I see are stamp duty and CGT. In some states including NSW seems like stamp duty is only nominal ($50) and unlikely to have much if any CGT if selling straight after construction.

A SMSF cannot buy residential property from a member.
 
Thanks all,

Sounds a lot more complicated than first thought mainly due to the fact that it is off the plan and requires LRBA.

What about if I purchase in my own name and once the building is completed and strata titles are issued, I sell to my SMSF. The main issues I see are stamp duty and CGT. In some states including NSW seems like stamp duty is only nominal ($50) and unlikely to have much if any CGT if selling straight after construction.

Hi

The relevent change to the NSW Stamp Duties Act is covered at section 62A http://http://www.austlii.edu.au/au/legis/nsw/consol_act/da199793/s62a.html

The Act states that the duty of $50 is payable on transfer of real property from a person to the trustee of a SMSF and is only applicable where:

a) the transferor is the only member of the superannuation fund or the property is to be held by the trustee of the superannuation fund solely for the benefit of the transferor, and

b) the property is to be used solely for the purpose of providing a retirement benefit to the transferor.

As you are contemplating using a LRBA the payment of nominal stamp duty would not be applicable as the property would need to be transfered to the security custodian (bare trust) and as such would not meet the requirement "to be held by the trustee of the superannuation fund".
 
Thanks Mike

That is interesting. The argument would be that the beneficiary of the bare trust is the SMSF.

If your interpretation is correct it would also mean that after the LRBA is paid off and the property then transfer back to the SMSF, it would trigger another stamp duty payment.
 
Thanks Mike

That is interesting. The argument would be that the beneficiary of the bare trust is the SMSF.

If your interpretation is correct it would also mean that after the LRBA is paid off and the property then transfer back to the SMSF, it would trigger another stamp duty payment.

Hi

I've had my understanding confirmed by a tax partner of a Sydney CBD based second tier chartered accounting firm.

On the transfer of the property from the bare trust when the debt is repaid there is no stamp duty payable so long as the bare trust has been correctly prepared and stamped when the property was originally purchased.

In NSW the bare trust document needs to be taken to the OSR for stamping along with evidence that the SMSF paid for the property and that the bare trust trustee holds the property for the sole benefit of the SMSF and its members.

So long as this is done no stamp duty is payable when the transfer of ownership is complete.
 
Thanks Mike

Can I get this correct.

1. Transfer from name to SMSF - nominal duty
2. Transfer from SMSF to bare trust due to LRBA - full stamp duty
3. Transfer from bare trust to SMSF on completion of LRBA - no stamp duty

Why is 2. and 3. treated differently, as it is transfer in opposite directions?
 
Thanks Mike

Can I get this correct.

1. Transfer from name to SMSF - nominal duty
2. Transfer from SMSF to bare trust due to LRBA - full stamp duty
3. Transfer from bare trust to SMSF on completion of LRBA - no stamp duty

Why is 2. and 3. treated differently, as it is transfer in opposite directions?


The difference is #2 can not be legally done as a SMSF can not leverage an existing asset it already owns because under the LRBA the loan purpose must be soley for the acquisition of an asset.
 
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