Holidaying in your SMSF IP?

[Lawry]

http://www.theage.com.au/money/super-and-funds/super-draws-a-growing-diy-band-20131101-2wocv.html

quote: "...a Sydney couple in their 40s, recently started an SMSF. '?What we like about it is we can make our super funds work for us,? van Pelt says. ??We are taking control of our destiny in a practical manner.?? Two-thirds of their funds are held in Australian shares. They are also buying a luxury apartment in Queenstown, New Zealand, where prices are more affordable than Sydney. The deal will see them borrow 50 per cent of the apartment?s $NZ520,000 (A$456,000) price and use tenants to pay off the loan. An added lifestyle advantage comes with their plan to take some of their holidays there."


..didn't think that last part was allowed? and they've gone and said it on a national media site?

 

[marg4000]

They can expect a visit from the auditors shortly to ensure they are complying with all regulations.
Marg

 

[spanna]

http://www.theage.com.au/money/super-and-funds/super-draws-a-growing-diy-band-20131101-2wocv.html

quote: "...a Sydney couple in their 40s, recently started an SMSF. '?What we like about it is we can make our super funds work for us,? van Pelt says. ??We are taking control of our destiny in a practical manner.?? Two-thirds of their funds are held in Australian shares. They are also buying a luxury apartment in Queenstown, New Zealand, where prices are more affordable than Sydney. The deal will see them borrow 50 per cent of the apartment?s $NZ520,000 (A$456,000) price and use tenants to pay off the loan. An added lifestyle advantage comes with their plan to take some of their holidays there."


..didn't think that last part was allowed? and they've gone and said it on a national media site?

Maybe referring to tax benefits on flights? IDK

 

[Property Hoarde]

They can not, sort of.

http://www.cleardocs.com/clearlaw/superannuation/smsf-holiday-homes.html

Acceptable maintenance of a beach house: merely an incidental benefit

In line with an SMSF investment strategy, the SMSF trustees invest in a holiday house in North Queensland. The property is managed by agents and available to third parties for short term rental at commercial rates. In the off-peak season when the house is not rented, the SMSF trustees stay in the holiday house to carry out maintenance. The SMSF trustees pay the normal arm's length commercial rates to the agent for the stay.

The Commissioner's view is that this incidental advantage does not breach the Sole Purpose Test because the benefit is:

?incidental to the legitimate purpose of maintenance of the investment in accordance with the Sole Purpose Test;
?relatively insignificant; and
?provided at market value.

Unacceptable separately negotiated purchase of holiday house: more than an incidental benefit

The members of an SMSF own a holiday house in a popular tourist destination where they holiday every year. The SMSF trustees invest in a block of holiday apartments at a nearby destination. When investing, the trustees negotiate for the SMSF members to be able to stay in the apartments free of charge ? that arrangement is not a standard feature of the sale of the apartments. As soon as the trustees invest in the apartments, the members sell their nearby holiday house.

The Commissioner's view is that this advantage is more than incidental and so breaches the Sole Purpose Test because:

?it is clear that the benefit to the members is an intentional part of the investment; and
?the purpose of the investment is not exclusively for the sole purpose of providing retirement benefits


Read more: http://www.cleardocs.com/clearlaw/superannuation/smsf-holiday-homes.html#ixzz2jMmiJXgR
Follow us: @CleardocsAU on Twitter | Cleardocs on Facebook

 

[Property Hoarde]

They can expect a visit from the auditors shortly to ensure they are complying with all regulations.
Marg

I have already taken note of their names just in case the audit comes into my office.

 

[wylie]

What would happen to someone who is living full time in a house bought in a SMSF?

 

[Property Hoarde]

What would happen to someone who is living full time in a house bought in a SMSF?

nothing.

It is a breach for the SMSF and penalties for the SMSF will depend on how they deal with the ATO on this matter and if and how the trustees fix the breach.

I think in some cases the trustee can be fined.

 

[wylie]

I thought there were heavy fines, and possible jail time? Fraud?

I don't know who told me but I know there are people out there doing this without realising the risks (and some who know it but are prepared to take the risk).

I reckon data matching will see some people in big trouble.

 

[Aaron_C]

I wonder how they'd find out you go there for a holiday?

 

[geoffw]

I wonder how they'd find out you go there for a holiday?

If they hadn't told an Age reporter, nobody would have found out.

 

[datto]

I think if the super fund is naughty and does not comply then it loses its concessional tax privilege and is taxed at the highest marginal tax rate.

 

[Ausprop]

I wonder how they'd find out you go there for a holiday?

they wouldn't, unless you plaster the fact all over a newspaper

 

[Redwood]

http://www.theage.com.au/money/super-and-funds/super-draws-a-growing-diy-band-20131101-2wocv.html

quote: "...a Sydney couple in their 40s, recently started an SMSF. '?What we like about it is we can make our super funds work for us,? van Pelt says. ??We are taking control of our destiny in a practical manner.?? Two-thirds of their funds are held in Australian shares. They are also buying a luxury apartment in Queenstown, New Zealand, where prices are more affordable than Sydney. The deal will see them borrow 50 per cent of the apartment?s $NZ520,000 (A$456,000) price and use tenants to pay off the loan. An added lifestyle advantage comes with their plan to take some of their holidays there."


..didn't think that last part was allowed? and they've gone and said it on a national media site?

Hilarious quote, two things I note (I am a ASIC registered auditor)
1. ATO will note the fund name (after contacting The Age) - result will be a non-complying fund, that will be nasty for the couple
2. if they are using the apartment, it will not pass audit (from reputable auditors) and result in a contravention of the sole purpose test and a qualified audit report.

What also I found interesting is the purchase of property in NZ, doesn't get a lot of media here, however, I am seeing many of my clients invest in NZ, particularly Auckland.