Our First Smsf Purchase - A Step By Step Guide

[Qlds007]

Oc1

It gets better than that.

As long as the development was not considered as running a business if the asset is retained for 366 + days then CGT inside Super is only 10%.

I have done many a small development inside my Super Fund.

Also done a bit of short term lending and vendor financing.

Structured correctly it can be a very flexible entity.

Of course you have to be using cash for such investment.

 

[Qlds007]

Shahin totally agree.

We do a lot of SMSF lending and still cannot get over the number of times the Solicitor preparing the Purchase Contract has the entity buying the property incorrect.

 

[Paul@PFI]

Unfortunately it is not uncommon that correct title is not in the fund name. And its often not the solicitors fault. Land titles only permits land to be registered in the name of a natural person or company. It doesnt allow "as trustee for the XXXX Super Fund" to be included. Also if mum & dad own their factory unit and transfer it or sell it to their fund and the fund trustees are individuals then land title cannot be transfererd !! (ie Mum & Dad to Mum & Dad)...

This is generally an outcome arising from poor strategic planning or "DIY SMSF solutions". The practical rules to avoid this are :
1. NEVER have human trustees for any trust or super fund.
2. Use a sole purpose SMSF trustee co. That way "verlap" concerns regarding the company cant arise; and
3. If using a unit trust there is a technical problem that can occur. The Unit Trust trustee must NEVER be same entity as any other related party entity.
Worst case position can also trigger stamp duty in many states.

There can be acceptable ways satisfactory to ATO and auditors to fix a title issue ie : where SMSF Trustee Company is also a trustee of a family trust. Legal title is in the correct company name. But is the property owned by the fund or the trust ?? In such cases its a acceptable strategy to have a caveat placed over the property favouring the fund.

 

[Aaron_C]

Unfortunately it is not uncommon that correct title is not in the fund name.

Triple negative - I love it

 

[oc1]

Oc1

It gets better than that.

As long as the development was not considered as running a business if the asset is retained for 366 + days then CGT inside Super is only 10%.

I have done many a small development inside my Super Fund.

Also done a bit of short term lending and vendor financing.

Structured correctly it can be a very flexible entity.

Of course you have to be using cash for such investment.

Thanks Richard. Worth more consideration i think.

Oscar

 

[MIW]

I would think trustee ATF SMSF?

That's correct. It's the same way as having a corporate trustee (a company) for a trust (SMSF).
So for example it would be Redwing Pty Ltd ATF Redwing Superannuation.

 

[Terry_w]

That's correct. It's the same way as having a corporate trustee (a company) for a trust (SMSF).
So for example it would be Redwing Pty Ltd ATF Redwing Superannuation.

Not in NSW. It would just be Redwing Pty Ltd
(on a contract).

 

[MIW]

Bill,

I am interested in your info on the subdivide, what I have read this is not allowed under SMSF, if it was a single house it can be renovated and still a single house but if you buy a property and try to build mulitple units or second house the nature has changed of the investment. It seems crazy as your fund is interested in making profits etc for your investment.
Barney

The physical change can be allowed if there are no borrowings, so no borrowings on the existing house/land and you have cash to do the rebuild. However, it also has to satisfy the criteria that it is not an ongoing business that you are conducting so speak to an accountant that understands the rules....

 

[MIW]

We did out first purchase in SMSF around 18 months ago and have one more already. Return on actual funds in SMSF since then is around 15 % from the capital growth.

We have an 80 % LVR loan available for our next SMSF purchase. Not sure , but think it's with St George and have serviceability to get one more

Simple strategy

Soon to have four properties . This effectively becomes an index pension . Contributions and planned lump sum contributions will pay this off . I'm not planning on retiring from work but will continue to work part time , because I like my job ( most of the time ) and job will pay for daily living expenses so the Super can pay for the fun things .

Cliff

Well done...
I have just settled one IP in November 2013 with borrowing in SMSF with 80% LVR, only SMSF financials, with St George and offset account, provided personal guarantees (as we are self-employed), and provided only SMSF paperwork (it was not necessary to provide individual or our company financial).
Also, another IP loan just approved and to settle in December 2013 with the same criteria.
I will look for another two next year, as I was told by the broker that government is thinking to reduce LVR to 60% from 80%...perhaps due to increase in SMSF borrowing.
I should point out that we already had 3 properties in SMSF with no borrowing, so I presume some % of rental would be taken into account for serviceability.
Our strategy is to hold and pay off when the land could be subdivided or 3 townhouses approved to be built there, but that's a plan for the future.
So, I really think it depends upon individual situation, how much the financiers will lend, what property, and what does your SMSF already have...
I don't think we can place everyone in the same basket, as with the individual loan scenarios, right?

 

[MIW]

Not in NSW. It would just be Redwing Pty Ltd
(on a contract).

Thanks Terry, as you can guess I bought in QLD so perhaps it is different there??? I also, have been told that the date on Bare Trustee is vital depending in which state you buy as their could be stamp duty implications once the property is paid off and transferred to the SMSF.

 

[Qlds007]

Hi MIW

Yes in Qld the Trustee is noted on the Contract.

Also the date of the Security Trust is important to avoid double duty.

There are a couple of ways round this depending on who you use to prepare the Deed.

 

[Barney118]

I am waiting for pre approval finance with St George so I know what IP options I have it has taken 2 mths, I have been held up by not progressing because my Payslips didn't show additional contributions so they could verify. The chap was quite good about it all, initially I didn't make it over the mark until I contributed~200.
I needed to know where my limit was for budding at auction or how much I could borrow.
Just a tip for those thinking about it, I like to know where I stand rather than buy and sort out the details later to be disappointed.
They also had to consider personal finances since I needed to contribute to ensure I could afford the additional sacrifice.
Barney