Subdivision of a smsf property

Hi, would like to buy a business property with smsf and limited recourse borrowing. The property has too much land and would like to subdivide, which would offset most of the borrowing
It is not clear to me whether this would comply with the borrowing rules.
Any help would be appreciated

 

While there is a loan in place the nature of the property cannot be changed - subdivision would fall into this category.

You should seek legal advice from specialist SMSF lawyers on this. Depending on your circumstances there may be a way around this such as buying it outside of super and subdividing and then selling to a SMSF Trustee

 

Hi there

Based on the above - the answer will be NO unfortunately. The arrange must comply with the single acquirable asset test under s67, this will not.

Cheers

 

Do you have funds to complete the subdivision?

If so there maybe a way to achieve this and still comply under s67.

 

The single acquirable asset rule is the legal concern here (s67A). When you subdivide you create two assets (s67B) and the replacement asset rules doesnt allow land since s67A(3) has two limbs and while its possible they may be excactly the same value they will fail the other limb as they cannot be identical. Land cant be homogenous like for example two CBA shares may.

If partitioned on acquisition there may be two bare trusts but the complexities around a mortgage may be insurmountable. Esp with the small panel of lenders in the space. They want vanilla. I would seek high level smsf legal advice eg DBA Law