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SMSF Purchase of Units in a Non Geared Unit Trust

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Newbie

Views 9991

Replies 6

Hi,

 

If a Non Geared Unit Trust purchases Land only and then sells the Land, say 12 to 24 months later, can a SMSF purchase units in the Non Geared Unit Trust ?

 

Thanks

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Most helpful response

ATO Certified Response

Community Support

Replies 5

Hi @Anthony11,

 

Thanks for your patience whilst we received specialist advice regarding your question!

 

Generally, a SMSF is not prohibited from investing in an unrelated non-geared unit trust.

 

Where an SMSF invests in a related trust it will generally be classed as an in-house asset. An SMSF’S in-house assets must not exceed 5% of the fund's total assets.

 

However, an SMSF may acquire units (at market value) in a related trust without it being classed as an in-house asset if the trust meets the following conditions (these trusts are generally called non-geared trusts):

  • the trust does not directly or indirectly lease assets to related parties, other than business real property
  • the trust is not a party to a lease arrangement with a related party of the superannuation fund, unless the lease arrangement is legally binding and relates to business real property  
  • the trust does not have any outstanding borrowings
  • the trust does not invest in or lend money to individuals or other entities (normal deposits with authorised deposit taking institutions are excepted, but shares or units in other companies or trusts are not permitted)
  • there is no charge over an asset of the trust
  • the trust has not acquired an asset from a related party of the fund after 11 August 1999 other than business real property
  • the assets of the trust do not include a loan to another entity
  • the assets of the trust do not include an interest in another entity
  • the trust does not acquire an asset, other than business real property, that has been owned by a related party of the fund in the previous 3 years (not including any period of ownership prior to 11 August 1999)
  • the trust does not conduct a business
  • business real property leased to related parties ceases to be business real property
  • a related party of the fund becomes party to a sub-lease of an asset (other than business real property) that is owned by the unit trust
  • the trust conducts all transactions on an arm's length basis.

If one of the above requirements is subsequently not met, then the exception ceases to apply to existing investments by the fund in the trust (the investment will then be an in-house asset) and is unavailable to future investments in the trust

 

If you have further questions, you can phone us on 13 10 20 between 8am - 6pm, Monday to Friday to speak with an operator.

 

Thanks.

6 REPLIES 6
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Most helpful response

ATO Certified Response

Community Support

Replies 5

Hi @Anthony11,

 

Thanks for your patience whilst we received specialist advice regarding your question!

 

Generally, a SMSF is not prohibited from investing in an unrelated non-geared unit trust.

 

Where an SMSF invests in a related trust it will generally be classed as an in-house asset. An SMSF’S in-house assets must not exceed 5% of the fund's total assets.

 

However, an SMSF may acquire units (at market value) in a related trust without it being classed as an in-house asset if the trust meets the following conditions (these trusts are generally called non-geared trusts):

  • the trust does not directly or indirectly lease assets to related parties, other than business real property
  • the trust is not a party to a lease arrangement with a related party of the superannuation fund, unless the lease arrangement is legally binding and relates to business real property  
  • the trust does not have any outstanding borrowings
  • the trust does not invest in or lend money to individuals or other entities (normal deposits with authorised deposit taking institutions are excepted, but shares or units in other companies or trusts are not permitted)
  • there is no charge over an asset of the trust
  • the trust has not acquired an asset from a related party of the fund after 11 August 1999 other than business real property
  • the assets of the trust do not include a loan to another entity
  • the assets of the trust do not include an interest in another entity
  • the trust does not acquire an asset, other than business real property, that has been owned by a related party of the fund in the previous 3 years (not including any period of ownership prior to 11 August 1999)
  • the trust does not conduct a business
  • business real property leased to related parties ceases to be business real property
  • a related party of the fund becomes party to a sub-lease of an asset (other than business real property) that is owned by the unit trust
  • the trust conducts all transactions on an arm's length basis.

If one of the above requirements is subsequently not met, then the exception ceases to apply to existing investments by the fund in the trust (the investment will then be an in-house asset) and is unavailable to future investments in the trust

 

If you have further questions, you can phone us on 13 10 20 between 8am - 6pm, Monday to Friday to speak with an operator.

 

Thanks.

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Newbie

Replies 2

Hi ATO Community, We currently own buisiness real property via a family trust with a corporate trustee that has 4 equal, related share holders. We purhased the land in 2004, personly designed and built the buildings, car parks etc, arranged the subdivision and sold part of the land, established a buisness and ran it until 2006. When we sold the buisiness in 2006 we used some of the active asset CGT discounts. The income has been our primary souce of income since, but I guess it is a stretch to call it a active asset now? 

 

The property has a long term lease to a totaly seperate company. We are looking at options for transfering part/full ownership to one or more SMSF/s.

 

The NGUT/Non Geared P/L seems a good option when a member of the SMSF dies as it seems you would not need to sell the property to make the death benefit payment but just transfer the appliciable amount of units/shares?

1. Can we change a family trust into a NGUT without trigering capital gains tax & stampduty. Beneficial owners stay the same.

2. Could the trustee company just become the non geared p/l as it has no debt.

3. Not carry on a buisiness, (a) wages? (b) cars?/depreciation? (c) %2.5 capital allowance building.

4.Once non geared established,(a) Would CGT would be trigerred on transfer/sale to SMSF, (b) what about stampduty?

5. Would the council rate notice be sufficent for valuation purposes? 

 

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Community Support

Replies 0

 Hi @Frassld,

 

Welcome to our Community!

 

We're checking information with a specialist area regarding your query and we'll get back to you as soon as possible.

 

Thanks, JodieH.

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Community Manager

Replies 0

Hi @Frassld,

 

Thanks for your patience.

 

We have been advised that for you to get the most  relevant information to your questions you should apply for self-managed super fund specific advice.

 

To obtain information regarding stamp duty you are best to contact Office of state revenue in your state.

 

Thanks

 

KylieS

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Newbie

Replies 1

Hi Team, in a similar vein to this question, is there any limitations for a SMSF to acquire units in a NGUT that have have the folowing features:

  •  A property (an existing residential house on land) with nil charges / debts on title.
  • The unit holders of the NGUT are related parties to the SMSF.

 

Q1. Could the SMSF acquire >5%, for example 30% of the NGUT's units?

Q2. Could the NGUT replace the existing house with a new house?

Q3. Is there any limitations on the land held in the NGUT splitting from 1 title to 2?

Thankyou, Harleyboy

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ATO Certified Response

Community Support

Replies 0

Hi @Harleyboy

 

Thanks for your questions.

 

There don't appear to be any obvious issues with your scenario. If you would like to do some reading, we suggest that you check out the in-house assets page on our website.

 

If you would like us to take a closer look at your SMSF's investment proposal, we recommend that you submit a request for self-managed superannuation fund specific advice or speak with a SMSF professional.

 

Hope this helps.

 

Thanks,

 

ChrisR