Question: My sister-in-law wants to sell an investment property that she bought through her self-managed superannuation fund (SMSF), and my husband and I are considering buying it. Are there any legal and tax issues we should be aware of?
Answer: The relevant legislation prohibits your SMSF from purchasing a residential property from a member or associated and related party. There is no restriction on the reverse, so you can buy from the SMSF.
To help reduce the concern about the SMSF failing the ‘sole purpose’ test, we would recommend that the SMSF get an independent written valuation from a registered valuer to set the market price to sell to you. The SMSF will need to pay capital gains tax (CGT) at 10% (nil if a pre-CGT purchase, ie, purchased before 20 September 1985) if held for more than 12 months or normal tax at 15% if held under 12 months. You will need to pay stamp duty on the purchase. You will also potentially have a land tax liability depending on the land value and other property you already own (excluding the family home). And you should consider the entity you use to buy, ie, individual name/s or trust as part of your estate planning and asset protection requirements and how interest will be treated for tax purposes if using debt to help finance the purchase.
Ken Raiss from Chan & Naylor
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Chan & Naylor is an accountancy firm that specialises in the areas of asset protection, wealth creation through property investing, estate planning and tax planning. The company ranks in BRW’s top 100 accountancy firms in Australia. For more information, phone (02) 9391 5400 or visit www.chan-naylor.com.au.
The advice contained in this report is general in nature and its preparation has not taken any individual circumstances, objectives or financial needs into account. Readers are advised to seek appropriate advice from licensed professionals before embarking on any investments.
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