Buying from family members SMSF

Hey guys, my brother and I have the opportunity to purchase our grandmothers commercial property, however the property is held in her SMSF. We have a few questions:

1. Is it possible for an SMSF to sell to a property to a related party (e.g. grandchildren)?

2. What are the tax/legal implications for both parties?

3. Is it also possible to set up a family loan for the purchase (e.g. grandmother loans my brother and I the funds to the purchase from the SMSF)?

4. If a family loan is not possible, can you structure a commercial loan to borrow 100% + costs and potentially secure it against a residential property?

 

1 - Commercial property does not require the arms length test (unlike buying for residential in an SMSF)
2. Tax/legal implications depend on each person's personal circumstances - each party's solicitor and accountant can advise BEFORE you enter into the transaction.
3. Anything is possible - just have it properly documented

 

1. Yes
2. Lots of legal and tax consequences
3.yes.

 

Thanks for the reply.

further to point 2 - what's generally the best way to structure the transaction for best parties?

3. Best way to get family loans documented/setup, just talk to a solicitor?

 

The property sits in a SMSF - does this require that the sale needs to be at market? (SMSF may need to get a valuation as evidence for the price to be paid - if sold below market, this may have consequences to the members of the SMSF). A straight contract of sale would possibly be the optimal methodology for the vendor.

Purchaser may want a 10 year settlement period, below market sale etc.

So each party has their own agenda.

Does your grandmother have capacity? Are any other grandkids going to be put out by you buying this property?

 

Will we require a formal valuation, e.g. not from a RE agent?

Is stamp duty still payable on a commercial property, I heard that you can purchase the property as a going concern to avoid paying stamp?

And yes there are other grandkids, would this potentially be a legal headache later down the track?

And what's the most suitable way to document/set up a family loan?

And sorry what do you mean by capacity?

Cheers!

 

Go and see a lawyer.

 

• Yes a real valuation (Certified Practising Valuer) not an appraisal from an agent
• Yes, stamp duty is applicable unless you get a concession because you are divorcing your grandmother. You may get an exemption from GST if you are registered and the property meets all of the conditions of selling a going concern.
• Are you getting preferential treatment from your grandmother - this will raise some concern/cause resentment/disputes etc with your other relatives
• I'm not a solicitor/financier/bean counter - they can advise
• Capacity - is she mentally capable of entering into the contract (not suffering from dementia/has the capacity to act) - this may also give rise to disputes

 

See a lawyer. They will also address how you and your brother can acquire it and not be liable for each others debts

 

Also ask about other options like buying a life interest only or making large super contributions for the grandkids and then making them members of the same smsf.

There are opportunities here that are a combination of seemingly straight forward strategies. And they should be done in line with a family charter so everybody knows what is going on and arguments stop.

A good advisor is necessary.