Selling Family home to SMSF and making it a PPOR

I was under the same impression unless it is a CIP.

 

Yes a smsf cannot acquire residential property from a member.

 

One exception is if the property is business real property. Eg. A residential property that was used by a doctor as a surgery or units that a developer has developed

 

It rings just a few alarm bells for me too.

 

As stated above, cannot see this as compliant unless business real property exemption is satisfied. The are some strategies around this, but not the family home.

Cheers Ivan

 

I'm no legal academic. But isn't it common knowledge that you cannot live in a property that is in a SMSF? I don't think it can be a holiday home either.

edited to add:
O, so you are talking about the PPOR becomes an IP once it is placed in the SMSF.

 

Do you mean clients being advised to increase loans before moving out so that the clients can claim more interest?

Ive seen clients whose accountants or brokers have advised that. Which is incorrect advice of course

 

Rolf, if by re-gearing you mean releasing equity from the PPOR so it can then be used in an SMSF - then I think this would satisfy the sole purpose test if those released funds were then paid into the SMSF as a non-concessional contribution and perhaps using the 3 year bring forward "rule".
These funds could also be used as a related party loan to the SMSF from the members, but this is an area that the ATO is taking more notice of from a non-arms length income perspective - thus extreme care needs to be taken.
Whether such contribution strategies or a related party loan makes any sense from a investment and taxation point of view is a different question, for example the interest charged on the equity release wouldn't be deductible for the members (as PPOR owners) if they made a non-concessional contribution to the SMSF (as far as I understand the situation).
Maybe the strategy is being recommended because of recent speculation on reducing both concessional and non-concessional caps? In other words, pump as much as you can into super while you can!
I'm sure Terry, Paul & Ivan will correct the bits I get wrong

 

Rolf you're not crazy - all the subpar accountants are.

There's always a steady stream of shocker advice that I see, just the other day had a client come in with a scenario their accountant suggested, however he didn't know that it was a stamp duty even which would trigger a $50,000 cost - all to 'save' $1000/yr. Great ROI.

 

Must be a QLD thing as I have heard it twice from people up there being advised the same thing. A slight alterative is "buy the property that you want to retire in in your SMSF and make money today" theme as well.

 

"Non-compliant" are the two words the ATO will be stamping on these funds..

 

@Greyghost - Do all assets in a SMSF need to be liquidated upon entering pension phase? Can the asset be taken by the beneficiary/beneficiaries if they decide to wind up the SMSF and take the money/assets upon meeting the conditions of release?

 

My understanding is no... but that the asset (eg the property) is allocated to the SMSF's pension account. My understanding is that with a SMSF property the problem with putting it in the pension account lies in whether or not there is a LRBA over it (ie a loan). If there is it's no-can-do, so realistically the loan needs to be paid off before the asset can go into the pension account I believe. So the member couldn't draw a SMSF pension from the rent money of the SMSF property until the loan is paid off and the property allocated to the SMSF pension account. That's my plain English understanding anyway. I'm not an accountant of course.

There's a little bit about it here;
https://www.cleardocs.com/clearlaw/superannuation/smsf-pension-borrowing-compatible-update.html

 

No need to liquidate assets unless the trustee cannot pay the beneficiaries who have met a condition of release. I think an inspecie transfer to a member is possible too as long a a condition of release is met.