IP in SMSF, can we knock down and rebuild

Hi fellow investors,

My hubby and I acquired an IP through SMSF. We didn't get good advice from our SMSF adviser prior to buying so we bought an old house with the plan of knocking it down and building 2 townhouses. I recently spoke to a financial adviser from Sydney who said that there is a solution but we will need to engage his company to get the answer and he wouldn't disclose upfront his fees. He said he needs our full financial details and our retirement plan then he will determine what sort of financial planning we will need.

Anyway, has anyone came across rebuild of existing IP in SMSF. Is it possible? The only solution I could think of is buying the property and doing the rebuild outside of super. However, this would entail conveyancing cost and capital gains and we will be paying premium tax on capital gains when we sell the units only to put the profit in super as we are not retiring age yet and pay tax again on this super contribution.

Any ideas, opinions are highly appreciated.

Cheers,
Susan in Newcastle
 
Any accountant with experience in SMSFs will be able to answer all your questions.

AND will only charge an hourly rate for advice.

I hope you are still running.....as fast as you can!!
Marg
 
Sprint

Run, Forest, Run........... :rolleyes:

Check your trust deed and what it allows and doesn't allow.

Is the property not in a rentable state at present?

If it is tenanted, perhaps let it sit and accumulate some more super (cash) in your SMSF to fund the re-build later.

If it is a pull down job now..........I stand to be corrected however I do not think you can develop in the fund using the warrant lends. I may be wrong

In the future who knows? Perhaps we will be able to do a warrant loan to undertake developments to keep in the fund. The govt is running out of money so perhaps the rules may become friendlier

Selling out (as you've mentioned) will incure transaction costs.

You need to sit down and work out a strategy that suits you. That may include selling out, but not being so attached to doing the development in your own personal name(s). Just sell and bank the proceeds (10 % CGT to the fund) and maybe use those funds to leverage into two rentable properties using warrant lends.

Just some ideas that may help you.

Don't rush and stay away from that top secret financial planner
 
Hi fellow investors,

My hubby and I acquired an IP through SMSF. We didn't get good advice from our SMSF adviser prior to buying so we bought an old house with the plan of knocking it down and building 2 townhouses. I recently spoke to a financial adviser from Sydney who said that there is a solution but we will need to engage his company to get the answer and he wouldn't disclose upfront his fees. He said he needs our full financial details and our retirement plan then he will determine what sort of financial planning we will need.

Anyway, has anyone came across rebuild of existing IP in SMSF. Is it possible? The only solution I could think of is buying the property and doing the rebuild outside of super. However, this would entail conveyancing cost and capital gains and we will be paying premium tax on capital gains when we sell the units only to put the profit in super as we are not retiring age yet and pay tax again on this super contribution.

Any ideas, opinions are highly appreciated.

Cheers,
Susan in Newcastle

Hi Susan

The following comments only relate if you were thinking about borrowing to re-develop the property;

1/ if you were looking to borrow within an SMSF to re-develop, forget it. You can only use the SMSF's own cash funds. The reason for this is that all SMSF lenders will not lend for construction/renovation etc.
2/ one possible option and it may not suit your personal circumstances is to perhaps borrow outside super (you would need available equity and borrowing capacity) and then on lend to your SMSF.
 
Thanks heaps to all respondee and to the funny ones, you made me laugh. You have put back my faith that there are still good people around.

BTW I asked hubby to ask the accountant by email, account replied only 'yes, provided you are not doing it as a property developer', I think what he meant is professional property developer, and we have to come in to discuss with their FA.
 
The Super Fund cant be seen to be running a business, which is why your accountant made that comment above about being a property developer.
 
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