Managing your SMSF
KNOWING what assets your Self Managed Superannuation Fund (SMSF) can own is an important part of being a fund trustee.
You should also know what assets your fund can acquire from you or related parties.
New rules recently introduced may give more scope for your SMSF to borrow funds to acquire these assets but there are unique rules and guidelines that need to be adhered to.
As the trustees of your SMSF, you need to ensure that all assets held in the fund are consistent with the fund’s investment strategy.
That is, as trustee you need to consider issues such as risk and return, diversification of the fund’s assets, liquidity within the fund, and of course, the ability of the fund to discharge liabilities.
Following are the common questions we’re often asked about borrowing.
Can I move my existing rental properties into my SMSF?
If these are residential properties, then in most cases the answer is no.
Your SMSF can not acquire property from a ‘related party’ unless the property is used in a business (called business real property).
A related party
in- cludes you, your relatives, and in some cases your business associates.
It can also include entities that are controlled by these people.
Can I own my business premises through my SMSF?
Assuming that the purchase of a commercial property makes sense for the fund, there is nothing to prevent the fund from purchasing a commercial property.
The fund could even acquire the existing business real property from a member or related party!
Your SMSF could then lease the property back to your business so long as the lease is on commercial terms.
This could be a great way to boost your retirement savings as the rental income is taxed at a maximum of 15 per cent.
Can my SMSF borrow money to buy property?
Since September 2007, SMSFs have been able to borrow to acquire assets.
It’s important to recognise that as there are strict rules surrounding this, you should always seek professional advice.
Your SMSF can only borrow to acquire assets that it would otherwise be allowed to acquire - so in some cases your SMSF could borrow to acquire the member’s business premises.
Be careful though as the SMSF can not use the borrowings to improve the property (no extensions or renovations), so what you buy is what you’re stuck with until your SMSF has paid off the loan.
■ If you require any further information, contact Adam Purtill at the Stubbs Wallace office in Finley, on 5883 1477, who will attend to your entire self managed superannuation fund needs.
Adam Purtill at Stubbs Wallace in Finley is here to help with all your Self Managed Superannuation Fund requirements.