SMSF & Trust with same trustee

Discussion in 'Accounting & Tax' started by KOBAY, 2nd Jun, 2020.

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  1. KOBAY

    KOBAY New Member

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    Hi All,

    If you have a commercial property in your SMSF and want to occupy the property with your business, is it an issue if both the trust and the SMSF have the same trustee? As both the lessor and lessee are effectively the same?
     
  2. Terry_w

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

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    Yes a big issue because a person cannot contract with themselves. This would mean the trustee of the SMSF cannot enter into a lease with the Trustee operating the business.
     
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  3. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    It would be a serious legal problem
    1. SMSF laws regarding holding assets of the fund aside from that of others
    2. How could there be a lease ?
    3. SMSF concessional asic fee is only available to a special purpose smsf trustee company not a standard company

    There may (or may not) be merits to this type of arrangement using a ungeared unit trust with the trust having a different trustee. It cannot be the same entity to have a lease like arrangement and would fail Sis Reg 13.22 D
     
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  4. KOBAY

    KOBAY New Member

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    Thanks guys.

    Would changing the trustee of the trust fix this issue? The trust doesn't own any assets like property or shares.
     
  5. Terry_w

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

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    Yes
     
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  6. Elives

    Elives Well-Known Member

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    slightly of topic but super related, are high income earners 250k+ taxed 30% for their super contributions? if so whats the point? i mean why not just use a bucket company?
     
  7. JasonC

    JasonC Well-Known Member

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    If the high income earner isn't running a business (or are covered by the PSI rules) then they can't use a bucket company - all the income needs to be in their name. So 30% is a lot better than the highest margin tax bracket. Also there is low tax on the investment returns before retirement and once in retirement phase potentially no tax on earnings. Plenty of reasons to still put extra into super.

    Regards,

    Jason
     
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  8. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    The use of a corporate beneficiary only works for a discretionary trust.

    Receipt of trust income as illustrated, would involve the top marginal tax rate and Div 293 which is not a further 15% tax on income. It is a further 15% tax on up to $25K of the concesssional super ($3,750 max). The income tax at 47% is full and final. The company beneficiary tax at 27.5% - 30% is not full and final. Just a Division 7A issue could add further costs such as interest at 5.37% which almost equates to the Div 293 anyway. Plus accounting, ASIC etc. All part of a complex strategy that requires end to end advice. Just looking at a simple tax rate is not sufficient
     
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