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SMSF - to do or not to do for commercial property

Discussion in 'General Investing Discussion' started by Jazzyrod, 19th Feb, 2013.

  1. Jazzyrod

    Jazzyrod New Member

    19th Feb, 2013
    Hobart, TAS
    Hi All,

    First time post but I have read posts and responses on this site for a little while, and am constantly impressed by the knowledgeable people contributing here.

    I have recently been advised to setup a SMSF for myself and my partner and one of the main reasons for this advise was to transfer commercial property that we jointly own into the fund. The commercial property is occupied by my own business, which pays rent but without a registered lease in place.

    The advice has been provided by a professional firm but I am a little concerned as to whether the costs involved with the process are justified by the benefits. My understanding is that capital gains tax will be payable, and that there *may* be transfer costs related to stamp duty. What I am not clear on is whether GST would apply (as the vendor we are registered for and collect/remit GST) and whether contributions tax would also apply, and if the value of the property (around 1.1M) would exceed some sort of limit for contributions.

    I am currently 39 and my partner is 36, in case that is relevant.

    Any comments or advice would be most welcome - I am hopeful that the advice I have been given is accurate and suitable, but seeking some reassurance that this is the case.
  2. Terryw

    Terryw Well-Known Member

    9th Jun, 2006
    That could be good advice.

    Transferring property to your SMSF is prohibited, but there is an exemption for business real property.

    SMSFs have great asset protection, you will be able to claim the rent you pay to the fund as a deduction (30% if a company) but the fund will only pay 15% tax on the rent so there would be a saving right there. But if the fund borrows then there may be no tax to pay once interest is taken into account. Even if the fund is cashed up it may pay to borrow to purchase.

    Any funds released from the sale would be in your hands (or your company or Trust, whatever owns the proeprty now). This could then be used to pay down your personal debt such as you home loan.

    What I would do is to work out the costs to do this - CGT, stamp duty, legals etc and then do some further calculations to see if it will be worthwhile.