SMSF Joint Ventures

I have money in employer super, all in shares funds of course, that is not part of my personal investment strategy and I would prefer to put this to work in some development projects. I consider this super as extra to my personal retirement needs and as such investments may be less conservative than the balanced fund in current use.

I understand it is possible for a SMSF to enter a joint venture for property investing (I know the basics, no mortgage, can’t lease to relative etc) but I would like to know more of the limits of such a venture before going ahead and getting professional advise and starting the SMSF.

For me it would be a good way of assisting the finance of these projects, and the SMSF would benefit from a medium term (2-3 years) investment.

Also, perhaps in that time frame, it would be wise to have less exposure to the share market.

Problems I have found so far:

- using money in development projects must also pass sole benefit test for SMSF.

- An Investment strategy that allows most of SMSF assets to be in one investment.

- Not being considered as a "business". This is hard as the development must be done as GST registered because the properties will be sold within 5 years and so must charge GST.

- Setup with the correct unit trust arrangement.

- Cannot develop property already owned by individual, as then the SMSF would be investing in related party, so must be a newly purchased property bought by the unit trust.


Can anyone comment on these problems of advise their experience with SMSF joint ventures ?

 

SMSF joint ventures are very tricky and competent legal and accounting advice should be sort.

The key point with a joint venture is the joint venture agreement which states what each party contributes and what share of the completed property they get in return.

The trustees of the SMSF also need to ensure that the joint venture is actually a JV - not a partnership or trust investment.

I have attached some information which explains it all in more detail.

One thing I need to research is whether the second JV partner can contribute their entitlement in the completed/developed property to the SMSF as an in-specie contribution. Not likely with residential property - but maybe with commercial property (business real property).