Hi Community,
My SMSF fully owns a commercial property. Can the SMSF use the property as equity to purchase a share of the business? The SMSF will be a silent partner and none of the trustees will be working for the business. Also all the dividends will be going back into the SMSF.
Would love to hear your thoughts.
Thanks
Do you mean that the SMSF would buy shares in a related company, or a company that is renting the property?
If you mean that the SMSF would borrow money to buy the shares, then that would be outside the type of borrowing that a SMSF is allowed. A loan to buy shares could only be secured by a LRBA over the shares - security must not be given over other assets.
Also, if any director or member of the company was a part 8 associate, or if SMSF members could exercise control over the company, the shares would be an inhouse asset (IHA). IHA cannot exceed 5% of SMSF assets - at time of purchase and each year afterwards.
Failure to establish a fair market value for the shares at purchase would create NALI issues as long as the shares were held, as well as other SIS breaches.
You should see a SMSF expert before trying to do anything like this.
Do you mean that the SMSF would buy shares in a related company, or a company that is renting the property?
If you mean that the SMSF would borrow money to buy the shares, then that would be outside the type of borrowing that a SMSF is allowed. A loan to buy shares could only be secured by a LRBA over the shares - security must not be given over other assets.
Also, if any director or member of the company was a part 8 associate, or if SMSF members could exercise control over the company, the shares would be an inhouse asset (IHA). IHA cannot exceed 5% of SMSF assets - at time of purchase and each year afterwards.
Failure to establish a fair market value for the shares at purchase would create NALI issues as long as the shares were held, as well as other SIS breaches.
You should see a SMSF expert before trying to do anything like this.
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