SMSF and HDTs

[Nominees]

Hello,

Been a long time since I last posted here. Been busy working trying to get my business off the ground.

I have spent the last few hours catching up with all the latest info on HDTs and SMSFs etc... and need to clarify a few things.

One is... is it possible for a SMSF that has $50K in cash to buy units into a HDT, so that the HDT can use that money as a deposit to buy a property? (Obviously the property will be mortgaged. The HDT will be the morgagee.)

If we extend this a bit further and instead of the HDT being the morgagee, I am the mortgagee and use the funds to buy units in the HDT so that it can buy the property outright. Would this be allowed according to SMSF laws?

I have no problems with transferring all the income to the SMSF nor put a nice capital gain on the redemption of the units. (In fact that is would I would like to achieve, since CGT is a lot lower for SMSFs.)

Thanks!

 

[MikeF]

Hello,

... is it possible for a SMSF that has $50K in cash to buy units into a HDT, so that the HDT can use that money as a deposit to buy a property? (Obviously the property will be mortgaged. The HDT will be the morgagee.)


Thanks!

SMSF's can not lend to or invest in "In House Assets".

Section 71(1) of the SIS Act defines an In House Asset as: 'an asset of the fund being a loan to, or an investment in, a related party of the fund, an investment in a related trust of the fund, or an asset of the fund subject to a lease or lease arrangement between a trustee of the fund and a related part of the fund.

Under the In House Asset rules, a superannuation fund may not have in house assets of more than 5% of the fund's total assets.

In any case SMSF's can now borrow to purchase an asset with plenty of threads discussing the pros & cons available.

 

[Nominees]

I have done a bit more research and have found that a SMSF can buy units into a unit trust if the assets in the unit trust are unencumbered.

It appears then, that for this to work well it would be better to have a unit trust established for each IP. This way, over a period of time the SMSF could acquire all units pertaining to an IP and reap the tax benefits.

 

[Qlds007]

Nom

Hate to disagree with you but that is clearly not the case.

Mike has set out the current legislation in regards to SMSF and there are no expected changes to relax such.

 

[Nominees]

No probs. Just trying to get my head around all this.
I found this information on Chris Batten's web site. (http://www.investorone.com.au/index.aspx?p=specialreport click on the "special report - Download" link, and go to the last page you will see the structure I am referring to.)
Is this old information? Is this structure no longer allowed?

On another note, from what I can gather from Chris's web site, he encourages properties to be purchased in unit trusts as they can then be acquired by an SMSF at a later date if the SMSF purchases all the units. (This would be for long term investments.)
(He explains it here on his video http://investorone.cpe.tv/remote/?v=prop/prop_01.flv&s=prop/prop0001.jpg)

 

[nonrecourse]

Just to cofuse you; contributing units in specie....

If its a business property and the trust that holds it is not geared then your superfund could acquire some of the units and not be in breech of the SIS regulations. In any 3 year period up to 2012 you can contribute up to $450,000 of in specie units into your super fund.

So yes over time if you and your wife each contributed $450,000 before June 30 2009 and again before 30 June 2012 another $450,000 each if requirred then you could theoretically get around the inhouse asset rules. Time to utilise the $450,000 contribution is running out. The key is the property has to be deemed business property not a residential property.

Only a pollie and a gaggle of government silly service knobs could dream this stupid retirement system that we have.

 

[JacM]

The ATO is starting to pay a bit closer attention to this sort of thing now it seems.

http://www.smsfadviseronline.com.au...SFAdviser_Bulletin16_03_2015&utm_medium=email

 

[Terry_w]

Keep in mind, The legislation concerning this changed in 2009. Reg 13.22C