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Re: Can my SMSF buy a house (unit) off me the trustee

Newbie

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Hi, 

I am developing 4 units, 1 is set aside for myself to live in, 1 is set aside for me as an investment property. 2 were being built with the intention to sell.

 

I have just estabilshed a SMSF, which will be operational by the time any of the units are finished.

 

It has just crossed my mind that these two units would be great to keep for the SMSF, as I would be looking at property anyway, and the whole reason for the units is for investing.

 

I am reading that there are a few exceptions when trading within arms length, would this satisfy requirements, or can someone please point me in the right direction for who to talk to, as it seems its above the 2 firms I have been able to get a hold of.

 

Thanks in advance!

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Former Community Support

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Hi @nathansmsf 

The simple answer to your query is no you can't. A SMSF is prohibited from acquiring property from a related party. This covers both acquisition by sale of the property to your SMSF or the transfer of title. There are some exceptions from the rule. These include the following;

    • a listed security (for example, shares, units or bonds listed on an approved stock exchange)
    • business real property
    • an in-house asset, provided the market value of your fund’s in-house assets does not exceed 5% of the total market value of your fund's assets
    • an asset specifically excluded from being an in-house asset

    Please read the information on business real property and in-house assets to assist in understanding the exceptions. You can find this information on the ATO website under SMSF investments.

    I hope this is of assistance.

    regards

    ClareN

     

4 REPLIES 4

Most helpful response

Former Community Support

Replies 1

Hi @nathansmsf 

The simple answer to your query is no you can't. A SMSF is prohibited from acquiring property from a related party. This covers both acquisition by sale of the property to your SMSF or the transfer of title. There are some exceptions from the rule. These include the following;

    • a listed security (for example, shares, units or bonds listed on an approved stock exchange)
    • business real property
    • an in-house asset, provided the market value of your fund’s in-house assets does not exceed 5% of the total market value of your fund's assets
    • an asset specifically excluded from being an in-house asset

    Please read the information on business real property and in-house assets to assist in understanding the exceptions. You can find this information on the ATO website under SMSF investments.

    I hope this is of assistance.

    regards

    ClareN

     

Newbie

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Thank you so much for getting back to me, it has been a lot of help!

Newbie

Replies 0

Just thought I would contribute what I have found for future readers:

Can I sell property from my SMSF to myself?

Yes, if the transaction is at market value i.e. on an arm’s-length basis and you may need a documented independent valuation to support the purchase price.

 

Can I sell my investment property to my SMSF?

It depends what kind of property it is. Yes, for commercial property, farming property and business premises (if at arm’s length). No for residential property.

 

https://www.superguide.com.au/smsfs/property-and-super

Enthusiast Registered Tax Practitioner

Replies 0

Hi Nathan,

 

Clare from the ATO is correct in my opinion.

 

One possible scenario is that may apply to you is whether any of the units would be considered trading stock of a developer - i.e. refer to Example 37 on page 63 of SMSFR 2009/1

 

Example 37: Land development

  • Trevor is a land developer whose business involves purchasing land for development, obtaining council approvals, hiring contractors, building, selling.
  • Trevor purchases land for development and obtains approval to build seven units on the land.
  • Trevor is a member and trustee of an SMSF. As trustee of his SMSF he wishes to purchase one of the units.
  • Taking into account the use of the property in Trevor’s land development business at the time surrounding the purchase, the units will meet the requirements of the business use test if purchased:
    • off the plan before any activity occurs on the land;
    • after construction has commenced;
    • after the selected unit reaches lockup;
    • after all units have been completely finished but the landscaping is in progress;
    • after the entire development has been completed and the units are being actively marketed;
    • after the units have been completed for 2 years and the remaining units have been sold but one unit remains and was rented to an unrelated party at market rates; and
    • one unit used as a display home.

 

However, based on the information you've provided, you are likely not considered being in a business of property development (i.e. selling units for profit), however it might be worthwile obtaining some specialist legal advice on whether it's worthwhile applying for a private ruling if you are operating a property development business.

 

All the best.