inquiry about DA land purchase being real property

Discussion in 'Superannuation, SMSF & Personal Insurance' started by Timkot, 25th May, 2022.

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  1. Timkot

    Timkot Active Member

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    if an individual own s a block of land that is approved for subdivision, then is that land now classed as real property such that that persons smsf could purchase that land with subdivision approval in place.

    ta
    I am aware that you can't buy your own investment residential property but as the Ato says that if you buy a block of land that is DA approved prior to purchase then that is evidence that your intention was to develope said block of land which means effectively that your in the business of development so it automatically considered to be commercial in nature. I am just not sure how that translates, if at all to the above inquiry.
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    real property means land. Perhaps you mean 'business real property'?

    If the land is held as trading stock it would be business real property potentially, even if residential.

    No one can buy their own property - but the trustee of a SMSF can buy a property owned by a member of the fund, from the member, if it is business real property.

    I doubt that the ATO has said this as it would not comply with superannuation law.
     
  3. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    The test for business real property consider that test immediately prior to the acquisition. Its possible that the vendor could also be conducting a isolated profit making matter and still have ABN etc and it is not meeting the busienss real property test. There is a also a significant margin scheme issue if the parties can be considered associates
     
  4. Timkot

    Timkot Active Member

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    Thanks Terry, the part about the property being considered commercial if purchased with a Da I meant to say as a private individual, I appreciate your input, thanks
     
  5. Timkot

    Timkot Active Member

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    thanks Paul for your reply
     
  6. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Its possible for vacant land to pose an acquistion concern for a smsf if borrowing are involved.
    s67A requires a SMSF only can commence and maintain a borrowing to acquire a single acquireable asset. ie You cant change it.

    Two problems
    1. If the SMSF borrows to buy the land then the LAND is held on trust. The SMSF cant borrow to build as then there isnt a single acquireable asset. Lenders wont approve such a loan.
    2. If the SMSF uses cash to construct it owns the building but its held in the name of the custodian trustee, not the SMSF. The SMSF cannot add further land or buildings to the custodian trust

    But if the acquisition is without loans and borrowings etc The land will also be subject to the limits of s66 SISA which wont permit acquisition of RESIDENTIAL use land from an associate if that is relevant. Unless in some way the land is buiness real property of the associate / vendor. Of course that may give rise to GST issues.

    If a SMSF locates property which is resi use and the vendor is unrelated there may be no concern if the SMSF can self fund the purchase and construction
     

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