Purchase a property through a SMSF

[The Porky]

Hi everybody,

I have a question in terms of a potential purchase of a property through our SMSF.

Currently the property is a holiday rental and is rented to many different people throughout the year on a short term basis (i.e. days or weeks at a time). I would be looking to using the property for the same purpose.

However in terms of the utilities (i.e. gas, water & electricity) given these are inclusive as part of the rental fee that will be charged.

In whose name should the utilities be connected? Should they be in my own personal names or in the name of our SMSF?

Would I be correct to assume that it would be the later given that the money for these bills will need to come from the SMSF funds.

Any assistance would be appreciated.


Cheers

 

[Propertunity]

Bills do not go in your personal name. Utility bills go in the name of the SMSF.

 

[Redwood]

Hi everybody,

I have a question in terms of a potential purchase of a property through our SMSF.

Currently the property is a holiday rental and is rented to many different people throughout the year on a short term basis (i.e. days or weeks at a time). I would be looking to using the property for the same purpose.

However in terms of the utilities (i.e. gas, water & electricity) given these are inclusive as part of the rental fee that will be charged.

In whose name should the utilities be connected? Should they be in my own personal names or in the name of our SMSF?

Would I be correct to assume that it would be the later given that the money for these bills will need to come from the SMSF funds.

Any assistance would be appreciated.


Cheers

Hi there,

Trust all is well.

Holiday rentals and SMSFs raise alarms or red flags for the SMSF auditor (administrator) and will raise the focus of the ATO - its high risk, you want to do it right so you donot breach the sole purpose test - that is you cannot live in or use the said asset.

I highlighted in bold a comment which is concerning - you cannot use the asset not for a minute an hour or a day. This is common and unless I am reading it wrong - you will breach the sole purpose test. This will have adverse consequences for your fund and members of the fund.

Re utilities - no it is not in the name of the bare trust - it is in the name of the SMSF. The bare trust is bare - the sole purpose is to hold title of the property beneficially for the SMSF. All expenses will be in the name of the SMSF.

Another thing - be careful with the title of the asset - the contract of sale will not be in your personal name, there will be a different name in each state and the bare trust will need to be executed at different times depending on state to ensure SIS compliance and avoid double stamp duty.

Hope that helps

Cheers, Ivan

 

[The Porky]

Thanks for the reply most appreciated.

Apologises I didn't mean that I would be living in the property. I just meant that I would continue to rent it out on a short term basis.

Cheers

 

[Redwood]

Thanks for the reply most appreciated.

Apologises I didn't mean that I would be living in the property. I just meant that I would continue to rent it out on a short term basis.

Cheers

Great to hear porky. Cheers, Ivan