Commercial property and SMSF

[Matthew38]

There are a number of optiosn available to you.

1. The standard option which is establishing the LRBA with a bare trust and obtaining the loan. The bare trust will be the owner of the property with the SMSF nominated as a beneficiary. Generally this all needs to be established prior to the contract being finalised. Many financial advisers will be able to refer you to a specialist SMSF adviser or lawyer who can use an off the shelf trust deed and document solution, which are quite common in the industry. When the loan is paid off the bare trust is then wound up and the property is transferred to the SMSF.

2. You could borrow the money and purchase the property yourself and later on, as it is a commercial property, either sell it to the SMSF or transfer the property to the SMSF by way of an in specie transfer (although this is subject to contribution caps, which if breached will trigger additional taxation consequences).

3. You could borrow the money yourself and then on lend it to the SMSF as part of the LRBA.

I agree with Mike regadring the payment of stamp duty and there would never be Sd payable on transferring an asset out of the SMSF to the bare trust as Mike has pointed out the LRBA can only be used for the acquisition of a new asset SMSFs are unable to borrow against existing assets that they own or use those assets as security.

 

[mgl1100]

Back to one of the original questions, the purchaser is the corporate trustee, being the legal entity purchasing the property - the purchaser details on the front page of the Contract and on the Transfer can read "ABC Pty Ltd ATF ABC" or it can just read "ABC Pty Ltd".

 

[MikeF]

Back to one of the original questions, the purchaser is the corporate trustee, being the legal entity purchasing the property - the purchaser details on the front page of the Contract and on the Transfer can read "ABC Pty Ltd ATF ABC" or it can just read "ABC Pty Ltd".

Hi mg

If there is going to be a Limited Recourse Borrowing Arrangement the name on the contract & transfer needs to be the security custodian entity's name not the SMSF.

 

[PrimeCommercial]

Many financial advisers will be able to refer you to a specialist SMSF adviser or lawyer who can use an off the shelf trust deed and document solution, which are quite common in the industry. When the loan is paid off the bare trust is then wound up and the property is transferred to the SMSF.

I had a group of lawyers come into my office yesterday to drum up some business by spruking the "purchase commercial property in SMSF".

It was intersting to note one particular comment about the transfer of the property from the bare trust to the smsf once the loan is setteld.
Apparently with some standard "off the shelf" trust deeds are drawn where the property can be transferred to the smsf once the loan is paid in full. They went on by saying if the transfer of the property to the smsf is conditional upon something happening like the payment of the loan then this will trigger a CGT event.

From what was explained to me the trust needs to be setup so that it is an unconditional right of the smsf to acquire the property for there to be no CGT payable.

This may be widely known throughout the industry and just the legal eagles trying to show how good they are but I thought it an interesting point and something I hadnt heard before.

 

[Terry_w]

There are a few issues once the loan is paid off. One is cgt and the other is stamp duty. I think there was an issues with the wording of the duties act in Nsw I am not sure if the act has been amended to rectify this or not.