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SMSF and buying investment from related party

Discussion in 'Superannuation, SMSF & Personal Insurance' started by shrek, 11th Jul, 2010.

  1. shrek

    shrek Member

    Joined:
    21st Jun, 2009
    Posts:
    13
    Location:
    Brisbane
    Hi All.

    Quick question, I have a investment with the now default Great Southern for High Value timber which has been taken over by Lowell Capital and the investment now looks like it is back on track. (thankfullty).

    As I financed the purchase of this can my SMSF buy the asset from me to free up cash to allow for me to make another purchase (investment property)

    if this can be done I would like the SMSF to buy outright the investment from me which in the long term would be better as the returns would be tax lower than if it was in my name (which is currently is)

    thoughts?

    Cheers

    Simon
     
  2. Superman

    Superman Well-Known Member

    Joined:
    6th Nov, 2007
    Posts:
    343
    Location:
    Gold Coast, QLD
    Shrek,

    Your SMSF is not allowed to acquire assets from a related party, the exceptions being:
    - listed securities acquired at market value
    - business real property (offices, warehouses, shops, factories, farms etc) - also at market value
    - in house assets less than 5% of the total assets of the fund

    I don't believe the timber project you mentioned would come under the above three exceptions.

    I also believe that if it was transferred (not just to a SMSF - but to anyone else) you as the original investor would lose your entitlement to the upfront tax benefits you would have claimed when you first invested in the scheme.

    In regards to freeing up cash to purchase an investment property, I know that you are aware that your SMSF has the ability borrow to purchase such a property as you asked a lot of questions about it in your previous post here:
    http://www.invested.com.au/5/smsf-loan-rural-check-ideas-37823/

    I hope this helps

    Good luck
    SM