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SMSF purchase off and lease livestock

Discussion in 'Superannuation, SMSF & Personal Insurance' started by Meyers, 23rd Jan, 2016.

  1. Meyers

    Meyers Willy

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    Gladstone, Qld
    First post, great site.

    Is the SMSF able to purchase and lease breeding stock (cattle). There are livestock leasing options available through rural banks and agents.
    The SMSF's cash would be used. Does this have to be stated in the deed if it is possible. It is a legit option for investment returns in the current climate.
     
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  2. Pauline

    Pauline New Member

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    Australia
    Just wondering. If you found out anymore about this we would like to purchase cattle also with our SMSF
     
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  3. Hosko

    Hosko Well-Known Member

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    Victoria
    Hope you got on this, cattle has had a good ride. Not so sure about the next 12 months, only hindsight will tell.....
     
  4. Hosko

    Hosko Well-Known Member

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    Are you already in the industry and looking for effective ways to maximise your wealth or is this an entry point for you? Are you thinking beef or dairy sector? And purchase breeders or store cattle for finishing? It is an area of interest for me will be curious how you are playing it.
    Best of luck with it
     
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  5. JoelVermeer

    JoelVermeer Member

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    Location:
    New South Wales
    Have you checked out SocietyOne's agrilending? This is a peer-to-peer platform for lending secured against cattle and/or sheep reared for meat.

    Without knowing your specific motivations for wanting to own cattle, SocOne's offering seems a much 'cleaner' way of getting exposure to that market. Although I note that it is, at this stage, only available to wholesale investors.

    This is not offered as financial advice. (However I do invest my own money with SocOne, hence I am speaking of that which I know)
     
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  6. AnthonyKing

    AnthonyKing Well-Known Member

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    Sydney NSW
     
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  7. SuperWarehouse

    SuperWarehouse Member

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    Melbourne, VIC
    The first time some-one asked me if an SMSF can invest in cattle I was unsure and asked the question on Linked-In. I saved the response have still have all the quirks regarding this discussion.
    There are certain rules and guidance and an SMSF should adhere to these rules in order to invest. These rules include making an investment for your long term retirement benefit, assets in the name of the SMSF and an investment strategy noting the nature of the asset purchased.
    I have a Fund investing in this asset class. The Trustee describes it as similar to shares. This is an asset he understands, there's different units (cattle) the SMSF owns and there is the potential of capital gains (increase in stock prices) and also income generation (calving).
    The way for a Trustee to minimise risk is to purchase assets you are fimiliar with. If you don't know the share market, don't dabble in shares you don't know. Same goes with cattle. Purchase items you are familiar with, have a good track record and fits your risk profile.
    This is a mouthful of info, but trust this gives you the guidance needed.
     
  8. Perry

    Perry New Member

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    Location:
    western Australia
    can i purchase machinery for upkeep of fire breaks etc. on the SMSF property
     
  9. AnthonyKing

    AnthonyKing Well-Known Member

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    30th Oct, 2010
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    Location:
    Sydney NSW
    Hi Perry and All
    Acquiring cattle or other livestock to breed, for sale or to produce milk or meat are all activities of Primary Production as defined and can be associated with an investment by a SMSF and there are considerable number of ATO advisory articles. This indicates that any PP activity may be able to be undertaken, however in practice the structuring is usually arranged with the SMSF Trustee owning the land as Business Real Property as defined in SISA 1993 and Regulated under SISR 1994 and the livestock being owned by by a related company or trust.
    57. Subsection 66(5) of the SISA provides that primary production business in subsection 66(6) of the SISA takes its meaning from the definition of that term in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997)
    A very large ATO Ruling - SMSFR 2009/1 says:
    primary production business : you carry on a primary production business if you carry on a business of:
    (a) cultivating or propagating plants, fungi or their products or parts (including seeds, spores, bulbs and similar things), in any physical environment; or
    (b) maintaining animals for the purpose of selling them or their bodily produce (including natural increase); or
    (c) manufacturing dairy produce from raw material that you produced; or(
    d) conducting operations relating directly to taking or catching fish, turtles, dugong, bêche-de-mer, crustaceans or aquatic molluscs; or
    (e) conducting operations relating directly to taking or culturing pearls or pearl shell; or
    (f) planting or tending trees in a plantation or forest that are intended to be felled; or
    (g) felling trees in a plantation or forest; or
    (h) transporting trees, or parts of trees, that you felled in a plantation or forest to the place:
    (i) where they are first to be milled or processed; or
    (ii) from which they are to be transported to the place where they are first to be milled or processed.
    I have been hired many times since I began my SMSF career in 1978, to advise on transfers of farming enterprises and other businesses to a SMSF Trustee and have generally used a standard company to hold the livestock or other Non BRP (Business Real Property) Land business assets for simplicity and occasionally a Discretionary/Family Trust where greater tax efficiency was required to distribute income to a range of family members.
    Other things to take with are all transactions with Related Parties as defined in SISA which must be conducted on full commercial arms length terms - see SISA s65 and s109 and read s66 too.
    Finally a SMSF Trustee must take care when considering any transaction where the Trustee is acting in the position of a creditor as in a business as this may be construed as a loan by the Trustee see SMSFR 2009/4 for further info.
    Regards to All
    AnthonyK