SMSF Development Property
- Thread starter havinago
- Start date
To the best of my knowledge you are not permitted to develop or even renovate or improve a property in a SMSF. Also you can't realise the equity to buy more IPs ....very limiting .....but check with your accountant...ok. LL
Do you mean something like this?
SMSF buy shares in unit trust. (for cash)
other smsfs or investors can also buy shares/units
Unit trust is a standalone business that buys the IP (with or without debt but probably not much) and develops it.
If so how does arms length work if you want to get involved in the running of the unit trust?
Could be way off but a mate did something a little similar to above. Wasn't so much development though they partnered up a few smsfs to buy shares/units in a unit trust that bought a commercial property.
Not quite.
If the unit trust is not controlled by a related party it can borrow. If a related party to a memebr of the SMSF controls the SMSF then it could not borrow. The SMSF can own units in a unit trust or in a private company, but there are many issues involved and this should not be done without legal advice.
If the unit trust is not controlled by a related party it can borrow. If a related party to a memebr of the SMSF controls the SMSF then it could not borrow. The SMSF can own units in a unit trust or in a private company, but there are many issues involved and this should not be done without legal advice.
Get advice.
You need to get advice. I used a structure like that many years ago in the early days of SMSFs, when SMSFs were not allowed to borrow. But I could borrow and I bought units in the UT, as did the SMSF, and the UT then owned the IPs. It worked a treat and geared that $100K into over $2m in IPs when it was at it's peak. The ATO then woke up and grandfathered it. Then when I retired I unwound the connection. The UT and the SMSF are now separate. You're on the right track but get advice on recent laws. Don't f..k with the ATO. Unless your packer-rich they WILL win. See my bruises ...
LL
You need to get advice. I used a structure like that many years ago in the early days of SMSFs, when SMSFs were not allowed to borrow. But I could borrow and I bought units in the UT, as did the SMSF, and the UT then owned the IPs. It worked a treat and geared that $100K into over $2m in IPs when it was at it's peak. The ATO then woke up and grandfathered it. Then when I retired I unwound the connection. The UT and the SMSF are now separate. You're on the right track but get advice on recent laws. Don't f..k with the ATO. Unless your packer-rich they WILL win. See my bruises ...
LLI'm actually "moving away" from my SMSF now. I only have very liquid assets in it. Basically shares and cash. Can close it like a zip . SMSFs are so well controlled etc . They are a sitting ducks for needy / greedy gov'ts in the future. And as the tax base shrinks and the welfare costs of our gimme gimme society increase ... bingo ... look at all those trillions sitting in super. All nicely documented with the ATO .... It's an absolute gimme as I see it. So use it, but don't have all your eggs where the fox can see them ...cause he IS coming !! ?LL
All good thanks Terry and LL.
I have no plans for this (was looking at reno options but have tamed them down too from the other smsf thread you started a few weeks back Terry.) and am now firmly fixed on buying a couple of boring ip's to sit in the fund and grow. I wouldn't bother with the smsf at all (because its effort) except that I know they will (especially when leverage is added in) outperform my industry fund by so much its not funny. I kind of feel obligated as a result.
LL I agree the gubmint could well increase taxes in the future but are they really likely to do a grab ONLY on smsf's? I would think with ageing population everyone is gonna get hit at some point.
I have no plans for this (was looking at reno options but have tamed them down too from the other smsf thread you started a few weeks back Terry.) and am now firmly fixed on buying a couple of boring ip's to sit in the fund and grow. I wouldn't bother with the smsf at all (because its effort) except that I know they will (especially when leverage is added in) outperform my industry fund by so much its not funny. I kind of feel obligated as a result.
LL I agree the gubmint could well increase taxes in the future but are they really likely to do a grab ONLY on smsf's? I would think with ageing population everyone is gonna get hit at some point.
Like a bulls-eye .....
Well, think about it. Who operate all the SMSFs ? The 'wealthy sector' or the 'welfare sector' ? I doubt there is another, single entity that is so clear a target AND is so completely, accurately documented with the ATO, auditors etc. Think of all the businesses who have rolled their business premises into their SMSF etc. Property itself is an easy, illiquid target for the taxman. Hence landtax etc. I think property inside a SMSF is a real potential double whammy. Oh, they will find a way !! Assets over a certain value, income over a certain amount ... etc. BTW the last thing I want to do is discourage you !! Just keep your powder dry LL
Well, think about it. Who operate all the SMSFs ? The 'wealthy sector' or the 'welfare sector' ? I doubt there is another, single entity that is so clear a target AND is so completely, accurately documented with the ATO, auditors etc. Think of all the businesses who have rolled their business premises into their SMSF etc. Property itself is an easy, illiquid target for the taxman. Hence landtax etc. I think property inside a SMSF is a real potential double whammy. Oh, they will find a way !! Assets over a certain value, income over a certain amount ... etc. BTW the last thing I want to do is discourage you !! Just keep your powder dry LL
I see your point I come to the opposite conclusion. As you say smsfs are not for the lowest socioeconomic groups but middle and upper classes. For me this tells me that SMSF's are also in the hands of the politicians. Like family trusts etc. Politicians have historically been pretty good at looking after their own interests so whilst I can see they could close some of the loopholes, I personally doubt smsf's will ever be taxed at double the rate of other investment instruments.
My portfolio outside of smsf will always (i think) be quite a bit bigger than inside, I have no plans to pump masses of extra funds into SMSF, and if the market justifies selling, then I will sell, but I still can't see any real reasons to avoid real estate in SMSF when I know where my best investing talent sits. I currently have NO tested skills in shares etc. But I am confident I can beat the average punter and market averages in property. Even with average performance and leverage its still attractive.
Worth considering all risks though, and future legislation change is one to consider.
All good here ... proceed helmsman.
All good here Mr Knight and good fortune ...and like I said I have no wish to discourage you, just to be weather vane for the future perhaps. I fully admit I am jaundiced by my personal experience where the ATO has simply changed their mind .... c'est la vie. LL
All good here Mr Knight and good fortune ...and like I said I have no wish to discourage you, just to be weather vane for the future perhaps. I fully admit I am jaundiced by my personal experience where the ATO has simply changed their mind .... c'est la vie. LL
