I believe I have an IP with exactly this arrangement. The ownership is 30% me, 30% my wife and 40% our smsf (tenants in common). The smsf share was paid as cash (i.e. this was our deposit); my wife and I funded our share via a loan. As an smsf cannot be involved with an asset that has a debt associated with it, our loan was secured against our PPOR.
The IP was purchased in 1992 for $125,000 and our strategy at the time was to make contributions to our smsf and use these funds for the smsf to buy my share and my wife's share and we would use this money to pay back the loan. That is, over time our smsf would own 100% of the IP and the loan would be fully repaid.
After setting this up, the Governement changes the rules - smsf could no longer buy assets from beneficiaries - that was fine except they made the rule retrospective. That is, we could NO longer use the smsf funds to buy my share and my wife's share and then use this money to pay back the loan.
Well, the IP is now worth $230,000 and our loan is $90,000. The ownership is still the same - 30% me, 30% my wife and 40% our smsf.
Where does that leave us?? So now, we have $140,000 equity in the IP that we CAN'T use as security (because an smsf cannot be involved with an asset that has a debt associated with it).
Would I do this again?? No way!!!
To get out of this mess (for example, for me to buy out the smsf and unlock the equity in the IP for other investments), then I would have to pay Stamp Duty and and the smsf would have to pay CGT. We are talking over $4,000 and, in reality, nothing is changing (we own 100% of the IP now and we will own 100% after the restructure albeit via different entities). Say goodbye to $4,000!!!
Hey, if I am wrong, can someone let me know!!!. I would appreciate all input.