Transfer investment property to super fund

Discussion in 'Superannuation, SMSF & Personal Insurance' started by Bender12, 2nd Jun, 2017.

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  1. Bender12

    Bender12 Well-Known Member

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    Just curious if anyone has done something like this? The rules state that you can only transfer 'business real property' into your own SMSF. But it appears there is a precedent if you can show that you are 'running a business'.

    Wilkinson Superannuation – When can residential property be transferred to a SMSF?

    This couple owned 9 residential properties though so not sure if you could do it too if you owned say 4 or 5?
     
  2. Terry_w

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

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    Yes, this is well accepted.
     
  3. Bender12

    Bender12 Well-Known Member

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    Thanks Terry. That's great to hear. I've been thinking this might be a good way to lock away a cash flow positive property until retirement age and use the proceeds to pay down PPOR and then debt recycle to purchase more properties in individual names.

    At the moment, PPOR debt is very high as I started out rent-vesting and only purchase my own place last year using equity in investments. Also serviceability is limited so by selling to SMSF, I can kill 2 birds with one stone as I can debt recycle and draw down the funds to purchase another property. Debt on the property that will be transferred to the SMSF would then be secured by my other properties via a substitution of security.
     
  4. Bender12

    Bender12 Well-Known Member

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    On second thoughts that would make this debt non deductible as the asset has been sold right? So better to pay down to $1 then redraw for investment purposes ?
     
  5. Terry_w

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

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    If you can get the property into super it is well worth considering.

    But substitution of security is not possible.
     
  6. Terry_w

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

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    Oh, i see you mean the SMSF getting a loan, but you keeping your loan open and using it to get another property? That could work.
     
  7. Bender12

    Bender12 Well-Known Member

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    Yeah that's correct. Over time say another 10 years, as the SMFS builds a larger cash balance then I would repeat and transfer another property into the SMSF.
     
  8. Terry_w

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

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    But could you still argue that the residential property is business real property? As your holdings diminish.
     
  9. Bender12

    Bender12 Well-Known Member

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    Yes if the same rules apply. I would still hold the same number outside the SMSF as the plan is to purchase another property to replace the one going in.

    Could this be the solution to the serviceability wall??
     
  10. Terry_w

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

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    it would be very difficult to get classified as a business.
     
  11. Bender12

    Bender12 Well-Known Member

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    You said that it was accepted above though? I guess it would be worthwhile to go through the process and get a special ruling?
     
  12. Terry_w

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

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    lol

    If you are classied as running a business the properties might be considered to be business real property and then it could be possible to transfer to a SMSF without breaching the SIS Act.
     
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  13. Bender12

    Bender12 Well-Known Member

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    Cool thanks for the info Terry.

    Anyone else on this forum that has done or considered this before?
     
  14. Stoffo

    Stoffo Well-Known Member

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    I was considering it, to improve my personal borrowing capacity.
    I have a commercial IP, and I was lead to believe that this could be transferred into a SMSF.
    Didn't have to as I managed to get finance on my last purchase (just)
     
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  15. Bender12

    Bender12 Well-Known Member

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    Yes from what I've read you can do it with commercial properties but not residential except if you can be considered running a business ( ie have a large portfolio).
     
  16. Terry_w

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

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    only business real property can be transferred. This includes commercial but it can include residential too. examples are where the property is trading stock such as developers selling completed units to a SMSF or where the residential property is being used as commerical property such as a doctor's surgery operating out of a residential house.
     
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  17. Bender12

    Bender12 Well-Known Member

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    Terry, what about resi's converted to boarding houses ? Would be great cash flow for the SMSF lol
     
  18. Terry_w

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

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    Could be possible.

    You should read the Tax Ruling on this put out by the ATO.
     
  19. Terry_w

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

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  20. Bender12

    Bender12 Well-Known Member

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    Awesome. Thanks! Will give it read :)