Purchasing Unit Through SMSF...

Hey guys,

My mum is trying to sell her investment unit, and I was wondering if it was possible for me to purchase it using my SMSF with 20-30% deposit? If so, how would we proceed? Are there any professionals you would recommend for SMSF loans?


Kind Regards,


David

 

You are a related party. Prohibited

 

what @Terry_w and @Rolf Latham said.

Also, not sure if it is the case for you, but let's say that you wanted your mum to stay on as a tenant, that wouldn't be allowed either...

 

Unit works out a little bit better and provides net profit of $3,852 after interest payments and annual costs, compared to current $3,600 annual return per year from 8% Interest...

Not sure if I've done my calculations correctly though but it is based on the following:

$180,000 purchase price
$255/week rent
20% Deposit + 5% Acquisition cost
5.2% Interest + 1% Yearly Costs

Maybe there's more benefits from depreciation and taxes?

 

Thanks Terry_w I like how you are very straightforward and give just the right answers

 

Yeah, I knew that wasn't permitted

 

Good question. So is there any way to unlock funds from your super fund to invest in property? If you are still around 30 to 35 years off retirement?

 

terminal illness?

 

Lol I should clarify, I don’t plan to retire in 30 years time. Just the age that is advised. I’ve got 10 to 15 years max if I stick to my plan

 

Purchase a commercial property that will be occupied by your business.

 

You can only access super if you meet a condition of release - which in cases other than death or illness means waiting until 60 in most cases

 

The most common conditions of release for paying benefits are that the member:

• has reached their preservation age and retires
• has reached their preservation age and begins a transition-to-retirement income stream
• ceases an employment arrangement on or after the age of 60
• is 65 years of age (even if they haven't retired)
• has died.

In special circumstances at least part of a member’s super benefits can be released before the member has reached preservation age. These are:

• terminating gainful employment
• permanent incapacity
• temporary incapacity
• severe financial hardship
• compassionate grounds
• terminal medical condition

 

• Buy residential property OTHER than from a related party / associate.
• Real commercial property can be acquired from a related party / associate at market
• Limited Recourse Borrowing Arrangement but not for property acquired which is otherwise prohibited.
• Widely held trust
• Public Unit Trust (Property Trust) which offers listed units
• Ungeared unit trust
• BrickX and similar fractional schemes HOWEVER care must be taken after a recent case

 

How about this:

1. The SMSF invests into a different and newly set up trust with SMSF fund is used as deposit.
2. The trust then borrows additional fund to buy over the unit.

This way SMSF is investing into the trust as an investment vehicle and not *directly* into the OP
mum's unit.

Is this allowed? I am assuming this should get around the related party restriction?
Is this practical?

I have read articles elsewhere that suggesting such set up for commercial property purchase but
like the expert advice and insights on this/

Thanks,
FXD

 

A bit vague...

how will it invest in the trust? will the trust be a related person? Will the SMSF control the trust?

 

Hi Terry,

This is the article I alluded to :

Using Your Self-Managed Super Fund for Investment Without SMSF Borrowing

Any thought on it?

Cheers,
FXD

 

The trust CANT borrow in most instances. A ungeared trust cant borrow. But another unitholder could.

1. Cant buy resi property from a related party even using a unit trust. SIS reg 13.22 has a three year waiting period rule
2. Cant borrow using the property as loan security (or give security to another person)
3. Cannot be used by or leased to a related party

I wouldnt be holding hope. These rules are there for a reason. The word "mum"are a stop sign

 

The author doesn't appear to be a lawyer.

Its a bit of a vague and imprecise article.

Best for you to seek legal advice.

 

Thanks Terry. But just conceptually, does that kind of structuring actually work at all for such
investment or purchase?

Cheers,
FXD