I am currently creating a SMSF with a corporate structure and want to buy a couple of properties for cash in Georgia, USA. Can anyone offer advice on how that can be done to ensure I don't have any issues when it comes to audit time? I intend to create an LLC in Georgia that will have the Aust company as the 100% member. Are there any tax issues in the US/Aust that I should be aware of? I already have 4 properties in the US so I have a good level of knowledge about this type of investment.
Thanks.
Do some a search in the overseas section as there have been some posts on this.
The SMSF should be the member of your LLC when purchasing using SMSF (funds).
You also need to ensure that the bank you use in US for purpose of chanelling rental funds has an affiliated bank account in Aust, otherwise you will not be complying with ATO and will be a problem.
Most importantly before you start buying in SMSF make sure you consult an accountant which has already set up these structures and understands what is required to comply, otherwise you will pay dearly.
I
Cheers WI
I have also thought about setting up a SMSF for puchasing property. KJM1970 could you advise how you set this up and how long it took you to do this? I might consider doing the same thing an invest in the US with this, but feel it may be safer for me to use a SMSF to invest here first? Thoughts people?
My thoughts – US market is obviously higher risk, issues of purchasing correct property, right returns, property management companies and currency play.
I would most definately play in your own backyard as I believe you should be an experienced property investor as mentioned above so many risks. Also I think there is no point investing in US unless you are buying multiple properties due to the costs involved in setting up structures etc. instead of positive income you may very well end up in the red.
I’m not sure what worldinvestor is referring to with the comment
“You also need to ensure that the bank you use in US for purpose of chanelling rental funds has an affiliated bank account in Aust, otherwise you will not be complying with ATO and will be a problem.”
What specifically are you not complying with?I have an SMSF as the member (shareholder) of an LLC in Ohio with myself as the manager with a Chase bank account with no Australian affiliation. SMSF has injected capital into the company and when funds at a comeback from rent it can come back as a return on investment and transfer through ozforex. I don’t see why the US bank has to have an Australian affiliation to bring funds back?
Here is the information I have in relation to the bank account situation for the LLC owned by the SMSF.
Banking Act
In order to meet the requirements of regulation 13.22c the entity could only operate a bank account if the money in that account amounted to a desposit with an ADI. Generally an ADI is an Australian bank or credit union. It is possible for a foreign bank to be an ADI if it has been granted the relevant authorisation from the Australian Prudential Regulation Authority (allowing it to carry out banking activities in Australia)
Accordingly it may be difficult for the entity to comply with regulation 13.22C unless it uses an Australian Bank account, an account with a US branch of an Australian ADI or a foreign (e.g. US) bank that is an ADI.This information above was forwarded to me however I cannot make any comment in relation to its accuracy and suggest that you seek professional taxation advise on this matter. I am not a tax professional , the information is general in nature and no liability is accepted.
king-co wrote:I'm not sure what worldinvestor is referring to with the comment "You also need to ensure that the bank you use in US for purpose of chanelling rental funds has an affiliated bank account in Aust, otherwise you will not be complying with ATO and will be a problem." What specifically are you not complying with? I have an SMSF as the member (shareholder) of an LLC in Ohio with myself as the manager with a Chase bank account with no Australian affiliation. SMSF has injected capital into the company and when funds at a comeback from rent it can come back as a return on investment and transfer through ozforex. I don't see why the US bank has to have an Australian affiliation to bring funds back?Unfortunately we don't make the rules, we just follow as per SAH post, the consequence could be paying 48%+ tax, when you should be paying no more than 15%.
Thanks for the input re bank accounts. That’s something I’ll need to do more research on. I already have Wells Fargo accounts but will have to see whether they comply. I am using a tax accountant in the US who regularly deals with Aussie investors and have a phone meeting with her next week to discuss my questions.
Shawnfromsydney – I am using an online company called Superconcepts for the SMSF set up. Still in the early stages though so not sure how long it will take.
I’ll also need to contact my accountant to see if they have any knowledge in this field.
Thanks everyone for their contributions.
Wells Fargo will not cut it, I also have Wels Fargo account – not affiliated with OZ
Just came back from Atlanta and set up an account with Bank of America as affiliated with bank in Oz, problem is you need to set it up personally, unless you are planning a trip to US going to be a problem.I know, what a bloody headache, I have no quick solution to this, perhaps some formites are able to provide a solution other than a flight to US.
king-co wrote:I'm not sure what worldinvestor is referring to with the comment "You also need to ensure that the bank you use in US for purpose of chanelling rental funds has an affiliated bank account in Aust, otherwise you will not be complying with ATO and will be a problem." What specifically are you not complying with? I have an SMSF as the member (shareholder) of an LLC in Ohio with myself as the manager with a Chase bank account with no Australian affiliation. SMSF has injected capital into the company and when funds at a comeback from rent it can come back as a return on investment and transfer through ozforex. I don't see why the US bank has to have an Australian affiliation to bring funds back?King-co: when you got your LLC set up in Ohio did you elect to remain as a foreign company (through entity for the LLC) or did you elect to be treated as a US domestic company? I would imagine to ensure compliance with the ATO, it would be the first option.
shawnfromsydney wrote:I have also thought about setting up a SMSF for puchasing property. KJM1970 could you advise how you set this up and how long it took you to do this? I might consider doing the same thing an invest in the US with this, but feel it may be safer for me to use a SMSF to invest here first? Thoughts people?LOL love the dirty Harry picture just made my day….
worldinvestor wrote:Wells Fargo will not cut it, I also have Wels Fargo account – not affiliated with OZ
Just came back from Atlanta and set up an account with Bank of America as affiliated with bank in Oz, problem is you need to set it up personally, unless you are planning a trip to US going to be a problem.I know, what a bloody headache, I have no quick solution to this, perhaps some formites are able to provide a solution other than a flight to US.
wells Fargo is the only one we have found for international clients that will set it up with out visiting the USA.
Hi Alex
I understand this is the case and unfortunately for the purpose of SMSF (Aus retirement fund) Wells Fargo does not comply as it does not have an affiliated bank in Australia and that is the issue.One of the stipulations from ATO (Australian Tax Office) is that the bank set up in US for chanelling rental income from SMSF has an affiliated bank account in Australia as mentioned previously, also refer to SAH post above.
Bank of America and there are others fit this criteria.
Therefore anyone considering purchasing via SMSF need to set up the correct bank account otherwise they may find that as they do not comply with ATO rules could be taxed as much as 48%, this would be a very painful experience considering one should be paying 15% tax.Its complicated and I don't pretend to understand any more than anyone posting, however, I have been liaising with an accountant who has been involved in this process for other investors and I believe he understands what is required to comply and of course there are many other issues where one would require professional help to get it right.
Cheers, WI
Check these links out for more information.
http://www.americanrealestateinvestments.com.au/smsf-investing/
However, it doesn’t mention Bank compliance issues but is a good start for people wanting to go down this path.
Most people seem to be set up with Wells Fargo accounts. (One of the safest of the US banks in my honest opinion) WF doesn’t engage in nearly as much of all this arbitrage derivative trading and other risky profiting strategies leveraging of its customers own savings.
When the federal reserve met with all of the bank leaders in the midst of the financial crisis in september 2008, Wells Fargo were one of the few banks not wanting to accept the Fed bailout money. Their books were solid and they were one of the few banks that would have survived had the fed not intervened with their loose monetary policy.
So it puts a lot of people in a tough situation if WF is one of the safest US banks but may not comply with SMSF ATO compliance rulings.
I didn’t have a problem with my annual SMSF audit with my Wells Fargo account. I just had to nominate my foreign income, and show proof of the accounts, money in money out etc. There was no mention from my auditor that it needs to have an affiliated australian branch…
It would certainly make it easier for the Aussie investors who have WF set up.
I have a WF account but have specifically just set up with Bank of America when I was in Atlanta in May for SMSF purpose.
This is the problem, so many different aspects when investing using SMSF makes it higher risk also ruling change all the time.
WI
worldinvestor wrote:Hi Alex
I understand this is the case and unfortunately for the purpose of SMSF (Aus retirement fund) Wells Fargo does not comply as it does not have an affiliated bank in Australia and that is the issue.One of the stipulations from ATO (Australian Tax Office) is that the bank set up in US for chanelling rental income from SMSF has an affiliated bank account in Australia as mentioned previously, also refer to SAH post above.
Bank of America and there are others fit this criteria.
Therefore anyone considering purchasing via SMSF need to set up the correct bank account otherwise they may find that as they do not comply with ATO rules could be taxed as much as 48%, this would be a very painful experience considering one should be paying 15% tax.Its complicated and I don't pretend to understand any more than anyone posting, however, I have been liaising with an accountant who has been involved in this process for other investors and I believe he understands what is required to comply and of course there are many other issues where one would require professional help to get it right.
Cheers, WI
Wi thanks for the information, read you other post below. Bank of America the least favorite bank here in the USA ..
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