Property Into SMSF

Hi All,

I had a friend ask the question what is the process/costs/ etc for him to get a property (in this case a commercial property) into his SMSF

Has anyone been through this or know the costs and process?

 

The major costs are likely to be capital gains tax and stamp duty.

There may be CGT concessions available depending on a whole range of factors, and your accountant is the one to talk to.

There may also be duty concessions depending on where the property is. Certainly in Victoria it should be exempt from duty on the transfer, and also WA I believe, but in most other states you'd be up for duty on the full value of the property. Not pretty.

Another thing to consider in Victoria is who the trustee's of the super fund are. The archaic titles office still only record the legal owners, and won't reflect any change in beneficial ownership. So correctly transferring a property from Mr & Mrs as individuals, to Mr & Mrs as trustees, can be troublesome, whereas to a company as trustee is simple.

 

If the person owns a commercial property that is used in a related business, on the sale (or transfer to SMSF) any capital gain can usually be reduced to zero through the general 50% CGT discount, the active asset discount and subsequently using the small business retirement exemption.

The area of CGT small business concessions is quite complex and each situation is different - but in general they are great for small business owners.

Any good accountant should be able to provide advice around utilising the concessions.

 

I haven't done this for a commercial property but the process will be similar to the one below.

If your friend requires a loan the LVR for commercial property will be lower than 72% so his SMSF will need to have a bigger deposit.
http://www.invested.com.au/6/our-first-smsf-purchase-step-step-36783/

 

I have assisted people purchase commercial property via an instalment warrant arrangement and the LVR was 65% (Westpac).

At the time the LVR for the same type of loans that we not limited recourse (i.e. normal loans secured against commercial property) was also 65% - although this can change depending on the quality rating of the borrower and the other magical formulas banks come up with.

Billv's post is a great explanation - you should get your friend to read it (get them to join investEd!).