2 x SMSF Commercial Property buy

Discussion in 'Superannuation, SMSF & Personal Insurance' started by wholly, 9th Sep, 2017.

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  1. wholly

    wholly New Member

    Joined:
    9th Sep, 2017
    Posts:
    1
    Location:
    qld
    Scenario:
    Found and industrial Property off the Plan to purchase (eg. total cost $250K) - NEW BUILD!

    Proposal:
    Two Separate SMSF will each own 50.00% of the unit. (There will be a commercial lease at market rates)
    Both personal SMSF have 2 members each and are individual trustees.

    Funding:
    100% Cash purchase (50.00% each SMSF)
    however looking to create it as a vehicle to unlock the equity and purchase more property via mortgages etc. Using the power of the lease income.
    GST Liability of $25k bridging finance (3-6 months depending on filing dates) from SMSF till lodgement and refund from ATO. [so as not to change the controlling interest above 50.00%]

    Purchasing Structure:
    From research is seems as though we would be best served as setting up a corporate trustee and unit trust that ultimately hold the property title?
    Advantages: 50% CGT Rollover relief
    Dis-advantages:The down side to this is we lose the depreciation on the building deduction (distributed to the SMSF)??

    Is this a good solution or am I missing something that will allow us better leverage and a better returning yield??

    Obviously I don't want to get caught regarding in-house assets etc. The magical wording seems to be controlling interest >50.01% by one party
     
  2. SMSFCoach

    SMSFCoach Member

    Joined:
    17th Jan, 2017
    Posts:
    14
    Location:
    Castle Hill, Sydney, Australia
    Valid strategy if it grows quickly to minimize costs. Costs of running 2 SMSFs and a Unit Trust will eat in to the yield on such a small investment so I assume the funds have significant other investments and also will proceed with the future plans you mentioned. If unrelated funds then make sure you agree exit clauses for the unit trust.
     
  3. Terry_w

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

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    Australia wide
    What could happen in a member dies? Trustee required to pay out death benefits to member, but it only holds units in the trust. Can the SMSF cause the trustee of the unit trust to sell property? If so what effect does this have on the other members,
     
  4. AnthonyK

    AnthonyK Active Member

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    12th Jul, 2018
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    Location:
    NSW
     
  5. AnthonyK

    AnthonyK Active Member

    Joined:
    12th Jul, 2018
    Posts:
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    Location:
    NSW
    This is my opinion based on 40 years Company, Trust and SMSF structure design.
    I have one question which is this:
    Is there any possibility that the SISA 1993 Part 8 Associates rules would apply?
    Because if that is a YES then you need a very specific design structure which will not be found in the market.
    If Part 8 Associates does not apply then you could use a non geared s13.22C Fixed Unit Trust.
    However a geared trust could provide a cash cushion with room to move for a buyout if there was a Member death/disability or retirement. This may be a lot of risk for not much reward on $250K.
    Regards to All
    AK