SMSF Rollover

Discussion in 'Superannuation, SMSF & Personal Insurance' started by Larry Masel, 7th Mar, 2017.

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  1. Larry Masel

    Larry Masel New Member

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    Hello. Can my SMSF pension phase rollover a commercial property to my new SMSF in pension phase? I asked my accountant and she said it was complex and she would get back. It seemed simple to me I want a SMSF with my 3 sons and another SMSF with my wife the commercial property is used in the business and has no debt the property is in blacktown
     
  2. Paul@PAS

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

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    So you want to contribute a non-SMSF property to the fund and commence a pension ?

    No but yes. I always say no first and what appears possible may be restricted by other rules. It is quite complex. Accountants cant give advice on it as its financial advice. Only a licensed adviser can give advice on this one.

    The fund must first be capable of accepting capped contributions since I assume the transfer is inspecie. (ie the fund wont use cash to buy the property at market value.) The total property value must fit within member caps. Some complex rules may allow this over more than one financia;l year but that is also highly technical and can be problematic this year. Then if this is acceptable the new member value is held as an accumulation interest and a pension would have to commence. Perhaps combined with an existing pension or as a second pension. Then the next concern is whether the post July 2017 $1.6m member pension cap poses a concern. There are specific strategies to consider.

    Depending on the state a duty concession may be available but that comes with rules too. Complex rules in NSW. Death benefits can be affected by the rules.

    There is also a liquidity issue to consider. The fund would need to pay a minimum additional pension which will be 4% or more of the property value as a rule of thumb. So if yield isnt right this could be difficult. I would address that also to avoid a liquidity drain on the fund which FORCES a sale later.

    The advice requires financial advice under AFSL and not all accountants can give this. There is no grey area here - The advice concerns contributions, rollovers, inspecie asset transfers affected by duty and state laws and also pensions being commenced, commuted perhaps and the issue of caps and min pensions being paid. The estate planning issues must also be explored before acting. You dont want a death benefit cashing rule to force a sale either.

    You biggest issue is the other family. A SMSF can ONLY have four members. The property rules under the NSW concessions for duty may not help you. It has strict limits on who can benefit from the property after transfer. ie not the kids. Depending on the value you and your wife may be able to do this but the kids are unlikely. GST issues need to be explore too. This is a curly but common strategy.

    Questions need to be explored around small business CGT concessions too which may assist. A few strategies may be available.
     
    Perthguy likes this.
  3. JacM

    JacM VIC Buyer's Agent - Melbourne, Geelong, Ballarat Business Member

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    A very important point raised here. A SMSF that intends to support its members in retirement exclusively with property and no cash holdings (and assuming holding costs of circa 30% of the rent to cover council rates etc) would need to be producing gross rental yields of circa 5.8%+ against current property valuation in order to satisfy the ability to pay minimum pensions of 4%.
     
    Scott No Mates likes this.
  4. Marg4000

    Marg4000 Well-Known Member

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    And as the person ages, the minimum pension percentage increases.
    Marg
     
    JacM likes this.
  5. Terry_w

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

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    I read it that one SMSF owns the property and it would be transferred to another SMSF with different members.

    You will need legal advice on this as well as financial advice. stamp duty would possibly apply as the beneficiaries of the two trusts are different.
     
    Craig Seddon likes this.
  6. Paul@PAS

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

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    s66 doesnt prohibit that as its business real property but other issues may restrict it. There are many issues to be addressed.
     

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