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Tony Hoffman Chartered AccountantParticipant@tony-hoffman-chartered-accountantJoin Date: 2014Post Count: 4Hi Amy… It could be ok but certainly the SMSF cannot use further borrowings to make Improvements to any property subject to a limited recourse borrowing arrangement (ie a Smsf property subject to a borrowing). also, you need to ensure that the improvement does not change the character or nature of the property… Eg you cannot subdivide or change from residential to commercial etc.
Tony Hoffman Chartered AccountantParticipant@tony-hoffman-chartered-accountantJoin Date: 2014Post Count: 4Hi Bullion,
You will not get a full main residence exemption even if you build a house and live in it… That is because the main residence exemption can only apply to land purchased within 4 years of the property being constructed on it. Hence, you will always have a cgt event on the land as you have owned the land for more than 4 years. Once a property is constructed on land, you must move in as soon as practical and then live in there For at least 3 months to even come within a partial main residence exemption. The sale of the separate land will be subject to cgt. If you have land only and have derived no income from the block, then you have probably not claimed a tax deduction for holding costs (ie interest on any loan, rates, mowing etc) .. Those applicable holding costs will generally be able to be added to the cost base and hence proportionately reduce the capital gain. The capital gain is deemed to trigger upon the date of signing the contract and not the settlement date… Deferring settlement does not affect the timing of the cgt event…. It is the contract date which triggers this. For cgt purposes, it is generally preferable to realise capital gains in a year in which you have little or no other income but that obviously depends on the level of the capital gains etc.
Tony Hoffman Chartered AccountantParticipant@tony-hoffman-chartered-accountantJoin Date: 2014Post Count: 4Hi guys… Unless your father purchased the land before Sept 1985, the transfer of the lots to the kids will trigger capital gains tax for your father. Even if there is a house on the land, which has been your dad's main residence, the main residence exemption will not be available where post cgt land is subdivided and separately sold. Most likely, the kids will have stamp duty payable on the transfer of the land to them as well. The tax liability will all rest with your dad. Generally for both cgt and stamp duty, the sale will be deemed to happen at "marker value".
Tony Hoffman Chartered AccountantParticipant@tony-hoffman-chartered-accountantJoin Date: 2014Post Count: 4That ruling you talk about is where borrowing is used by your smsf to purchase a property (via a limited recourse borrowing arrangement). The ruling covers whether your smsf can undertake further borrowing for "repairs" where the property is subject to an existing borrowing arrangement. If the repairs are minor, I would expect the smsf can use cash for the repairs and would not normally need to undertake further borrowing to fund the repairs. I think your question is whether or not the repairs are deductible? In that regard, repairs are normally only deductible where incurred via wear and tear due to the physical renting of the property (eg wear and tear by the tenant). If there defects existing at time of purchase, the costs of fixing these will normally be regarded by the ato as "initial repairs" and hence will not be deductible. Initial repairs may qualify for a capital allowance (depreciation) claim under Division 43 (or possibly Division 40) depending on there character.
