LAND SUBDIVISION within SMSF

Hi there
Any suggestions on whether you can buy a large landbank within SMSF and then outsource / JV the development to a related company (myself as director) outside super and shift all the profits to it.

This way you are not artificially increasing the value of your super fund,

Accountant advice was to transfer the property at market value just prior to DA but I want to avoid double stamp duty

I want to buy this in SMSF as cash is available, and it’s v hard to get finance outside super for vacant land anyway.

 

Couldn't do that

 

The SMSF must be capable of funding the land purchase and its holding costs. And then it gets complicated. A SMSF can own land and participate in a JV land development but its complex. Its role should be passive as land owner. And yes it can make a profit from that investment choice. Direct ownership of the land probably isnt the right approach however. And NOT a company.

 

Hi Paul thanks for your response

I have 70% LVR for the land.
$670/week resi lease
Effectively the rent pays down the loan on p&i which is why it is a suitable long term hold even.

It is a 4HA site in north Brisbane.
It is a 3-5 year process as I am exploring 25-30 Lot subdivision.

I have a further $600k cash in the SMSF to develop it but it may not be enough depending on construction and sale staging.

I was wondering if there was a shortfall if I could JV with a nonSMSF company? Or other family Memebrs could contribute costs ?

Otherwise the only option may be to transfer out of the SMSF and pay 2nd stamp duty once the DA is close?

 

Who owns the land?

 

Bare trust (has a 2nd Corp trustee) owns the land.
My understanding is upon paying off the land the bare trust is extinguished and ownerships reverts back to the original SMSF

I had cash outside super. But the gearing was available and the long term capital gains are capped at 10% so I thought it is an ideal vehicle to land bank a large speculative holding.

 

Title would still be with the bare trustee (Actually, I don't think it is a bare trust until the loan is paid off, but that is a different story). The SMSF trustee could demand the bare trustee transfer title when that happens.

So you have 70% of the value of hte property in cash? and the SMSF owns the property.
If you lend that money to the SMSF to do the development the SMSF wouldn't be able to do the development because it would be changing the character of the SMSF property.

It could be possible that the SMSF enters a JV agreement with a related developer as long as the SMSF land wasn't used as security.

I think the trustee shoud get some complex legal advice - try Sladens Lawyers.

 

The use of a trustee custodian could be a breach of SISA if the asset changes. And I believe it needs to change prior to a transfer of title on sale.

A SINGLE acquirable asset is the relevant requirement. To change the land into multiple titles is not itself the offending issue but can be !! The changes and additions to the land to make it capable of registration may be. eg addition of sewer etc. Has the fund given rights over the land to someone else under the JV ?? Thats could be a serious concern too.

I would seek advice from DBA Lawyers...They are SMSF legal experts.