Leasing SMSF IP

When filling in the details with the PM company to lease out your SMSF IP (ie, there is a loan on the IP and is held by a bare trust), which name do you put down on the management agreement? Do you put down the PTY LTD company name of the bare trust holding the IP, or the Pty Ltd company name of the SMSF?

 

I believe it is the company name of the SMSF - whoever (whatever) pays the fees or is providing authorisation for the fees.

- Andrew

 

It will need to be in the name of the SMSF not the Bare Trust.

Include SMSF Trustee ATF SMSF on the property management statement. All invoices should be in the name of the SMSF

Cheers Ivan

 

I'm pretty sure this is the reverse of what we were told to do - the invoices are being made to the Bare Trust company, and not the SMSF, as it is the trust that is responsible for the property until the mortgage is paid in full.

 

Thats incorrect...who is telling you that....

Cheers Ivan

 

Ivan,

So if the trustee of the fund is called "Smith Pty Ltd", and the SMSF is "Smith Family Super Fund", then should the wording on the management statement be:

Smith Pty Ltd ATF Smith Family Super Fund?

and the same for any invoices?

 

@Redwood Advice I had from Chris Batten from Macquarie Group Services was

Enter into a lease with a tenant in the name of the Custodian. At this point the lessor can be described as “Custodian Pty Limited” or “Custodian Pty Limited as trustee for the Warrant Trust”.

Liam Shorte the SMSF Coach confirms this as point 15 Property through super in a SMSF – Part 2: The Process

 

I side with Mike on this one.

The custodian company is the legal owner of the property

 

The legal owner of the property is the Custodian.
The beneficial owner is the SMSF.

@Redwood are you suggesting Council must invoice the rates to the SMSF or the custodian owner ? You know they will only invoice the legal owner. In a related party lease you could up with a mess...Perhaps even a Reg 13.22 breach if a Reg13.22 Trust was involved with that view. ie No lease.

Tax School 101 :
The custodian owner is ignored for income tax purposes as the beneficial ownership sits with the SMSF. For trusts (and a smsf is a trust) you disregard the legal owner (trustee) and report all transactions under the trust. On this basis all property dealings should be with the legal entity at all times and all accounting under the relevant trust.

Sign of a confused accountant : Prepares trust financials and includes a balance sheet for the trustee company.

Having on demand reliable advice from experienced advisers is an important issue for all SMSFs and Trusts.

 

The lease agreement will be the bare trustee, rental statements can be the SMSF per above - same as invoices of the fund.

All rates will be to the legal owner which is the bare trustee which the property is registered to
Cheers Ivan

 

I think the answer is no body 100% knows but I am more on Redwood's side.

As the income and expenses are recorded in the fund. The invoicing should be in the name of the fund. In saying that I would except both ways.

Ask your auditor as some will have an absolute opinion even when it is not 100% clear the correct way. Some might even breach you for not doing it the way they think is correct.

 

Then the trustees would have to explain the trust relationship to the agents. Wouldn't this be confusing for them.

I don't think the relationship is that of bare trust because the SMSF cannot demand transfer of title until certain conditions are met. Custodian trust is a better description.

 

Now I'm Really Confused

All, Lets do this.....
Lets assume the following names:

1. Trustee of the SMSF is "Smith Pty Ltd"
2. The SMSF name is "Smith Family Super Fund"
3. Trustee of the Bare Trust is "Hoges Pty Ltd"
4. The name of the the bare trust that the property is in is "Hoges Bare Trust No. 1"

So:
a) what name should the account statement/ rental agreement from the PM be in?

b0 What name should invoices be in?

 

The words bare trust arent a feature of SISA. The word custodian is used and describes a trust concept that is akin (but actually not) a bare trust.

Depending on the words used in the custodian trust deed then there may not actually even be a obligation and its maybe not a custodian trust either. Absolute entitlements arent always apparent and in some trusts are not a obligation but a possibility which could be a worry.

One for the lawyers that one and why SISA was modified so that a broader approach avoids a double duty possibility when absolute entitlement to the asset isnt passed to the smsf when the loan is repaid.

 

a) The property owner is Hoges Pty Ltd. The rent will be banked by the PM into the bank account of the Smith Family SMSF
b) Invoices for ownership costs would be in the name of the legal owner Hoges Pty Ltd. Paid by the SMSF.

Here is a good one for the SMSF community to ponder : If the property cost $400,000, Has a $100,000 loan and its is now worth $425,000 what is the value shown in the SMSF financials ?

Answer $325,000. Why ?

 

Lease is with the custodian trust corporate trustee Hoges Pty Ltd.

All rental income and expenses go into/paid from the SMSF's account. The SMSF corporate trustee enters into a managing agency agreement with the leasing agent, not the custodian trustee, so that is the entity which receives the statements.

 

The statements may pay costs invoiced to Hoges Pty Ltd such as rates.

 

This was my initial response - it is the SMSF Pty LTD ATF SMSF - for the statement and any expenses

The lease agreement will be bare trust....

Hope that helps Cheers Ivan

 

Thanks so much - that's what I thought (and hoped, considering that's how mine is set up…….)

 

"Hoges Pty Ltd"