All Topics / Legal & Accounting / SMSF Business Real Property

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  • Profile photo of ausi ski bumausi ski bum
    Participant
    @ausi-ski-bum
    Join Date: 2004
    Post Count: 18

    I own a number of apartments at a ski resort in Victoria that I rent out, one of them is 60% owned by me and 40% owned by my Self Managed Super Fund as co owners.

    I want to sell the Super Fund a greater percentage with the aim of over time building a portfolio of properties either jointly owned or soley owned by the Super fund or me personally.

    The apartment I am talking about is purely used as an investment property with some summer rentals but mainly winter rentals in the ski season.

    My intention was to increase the SMSF share at the original purchase price and not current price so I am certainly not mbennefiting personally from the deal.

    Would this qualify as a Business Real Property as it is only used as a commercial property ???. If not how can I sell the fund my share of the property?

    ASB Alpine

    Profile photo of AmandaBSAmandaBS
    Participant
    @amandabs
    Join Date: 2005
    Post Count: 549

    Talk to your Accountant. I think you’ll find you can’t sell an asset that’s not arms length. Once you’ve setup the joint owners as 60/40 thats it until you sell to a third party, and then you could buy another ip with the superfund owning a higher %.

    Amanda
    “It is better to be inconspicuously wealthy, than to be ostentatiously poor…”

    Profile photo of grossrealisationgrossrealisation
    Member
    @grossrealisation
    Join Date: 2005
    Post Count: 1,031

    hi ausi ski bum
    sorry to say this but structure structure structure and if the same entity that is buying and internally transfering structure is the most important part.have a chat with the person who setup your structure or post looking for an accountant who know lots about trusts and structures

    here to help
    If you want to get involved in some of the projects I’m involved in email to [email protected]

    Profile photo of Property WAProperty WA
    Member
    @property-wa
    Join Date: 2005
    Post Count: 132

    Hi ausi ski bum,

    Just wondering how much of a % your IP takes up as a proportion of your SMSF investment portfolio?

    Do you find that all outgoings (maintenance, management fees ect) and income received must be paid for and received on the same 60/40 split?

    Have heard of several people wanting to move into this but the paperwork, time and costs involved were to significant. Good to hear someone has a strucutre that works would be great to hear more.

    Sorry..think Ive just asked more questions than Ive answered. [confused2]

    Profile photo of hbhb
    Member
    @hb
    Join Date: 2005
    Post Count: 179

    Hi ASB

    Isn’t super a wonderful thing?
    And managed properly will provided you with a lovely retirement packaged.
    but mishandled can be a disaster.
    Ever since the ATO has taken control, its all done by the book.
    deviate at your own risk
    the ATO for the last few years has been auditing, then educating various SMSF of their obligations.

    we’ve been educated.
    accounting costs of $30k plus 2 years, to comply with the regulations

    what your trying to acheive is pushing up hill….there’s so many things wrong

    a good SMSF accountant ….who only deals in SMSF…is the way to go, not this forum.

    the ATO will only be nice for so long…then the penalties will start
    being close to retirement and over 2mil of assest, i didn’t need penalties.

    good luck

    hb

    Profile photo of ausi ski bumausi ski bum
    Participant
    @ausi-ski-bum
    Join Date: 2004
    Post Count: 18
    Originally posted by Property WA:

    Hi ausi ski bum,

    Just wondering how much of a % your IP takes up as a proportion of your SMSF investment portfolio?

    Do you find that all outgoings (maintenance, management fees ect) and income received must be paid for and received on the same 60/40 split?

    Have heard of several people wanting to move into this but the paperwork, time and costs involved were to significant. Good to hear someone has a strucutre that works would be great to hear more.

    Sorry..think Ive just asked more questions than Ive answered. [confused2]

    At the moment I have 2 properties with that 40% SMSF and 60% me and +1 mix, one we own and a fourth I am negociating now with no SMSF involvement.

    Alpine property has very different rules to other investments so the formular worked, I am just letting those properties remain as they are from now, they deliver to high a return to sell so there is no reason to change anything if I cant do as I wanted.

    I set up a seperate small business that manages the afairs of the flats in Falls Creek for me and at the end of each ski season I split the income into a dividend based on the ownership mix while retaining an amout for summer repairs and upgrades and the following years fee’s. Not a lot of work really as you only get paid once a year on these types of property. I do get around 8% return on the investment and theyhave nearly doubled in value in the past three years.

    I have my own web site and discussion board like this one dedicated to the skiing industry so marketing these properties in my case is a lot easier than foe most other people.

    Bottom line on this question is leave well enough alone to keep out of trouble with the ATO. Thanks for the answers

    ASB Alpine

    Profile photo of hbhb
    Member
    @hb
    Join Date: 2005
    Post Count: 179

    Hi ASM
    love that bottom line………………
    ” keep out of trouble with the ATO”
    But not sure about……………
    “leave well enough alone”

    Reading between the lines sounds to me like the fund could be walking a fine line.
    Even though your accountant might not have picked it up,
    the Independent Auditor should have.

    You do have an independent auditor????

    Deputy Commissioner Mark Jackson recently commented,
    “It’s worth noting however, that an area of contention which is often raised with us is the need for auditor independence. Under SIS the auditor plays a crucial role and is in fact a key to compliance.

    The auditor needs to report breaches of rules and regulations so that the trustee can know where errors are made and what needs to be rectified.

    If the auditor is not independent – for example if they are involved

    In running or advising the fund – then that fund is at greater risk of breaching the rules, as there is a risk that less scrutiny might be applied to decisions or activities he or she may have recommended.

    In other words where, for instance, an accountant recommended that a fund follow a particular course of action which was contrary to the rules, that infraction is quite likely to go unreported if the same accountant subsequently conducts the audit of the fund.”

    And reason why an Independent Auditor is needed is………….

    Deputy Commissioner Mark Jackson..
    “One of those supporting rules to which I would draw your attention is the requirement that any business or other financial dealings between a self managed fund and its members or related parties of the members must be conducted at arms-length.

    In other words the conditions attaching to those dealings should demonstrably be no more favourable than those which would apply to non-related parties. They must be at prevailing commercial or market rates.

    That being said, it’s clear some trustees do not appreciate the level to which the sole purpose provision underpins the regulatory regime applying to SMSFs.

    I say that because the benchmarking showed one of the most basic elements of a complying self managed fund, which indicates compliance with this “sole purpose” was often missing
    The area where we found most non compliance was the failure of the fund to maintain its assets separately from those of a business in which one or more of the trustees was involved.

    Trustees must keep money and other assets of their fund separate from their own money, while fund assets must also be kept separate from those belonging to a business run by one or more of the trustees.

    Trustees are also prohibited from using money belonging to the fund for personal or business purposes or as a form of credit when faced with such a need.”

    So there you go…..
    that 15% tax on SMSF does come with strings attached

    Just a quick question???????????
    “Alpine property has very different rules to other investments”

    Really………

    can you show me a link to the ATO website where i can learn more

    i love investments with “different rules” to the norm.

    hope this helps

    hb

    Profile photo of ausi ski bumausi ski bum
    Participant
    @ausi-ski-bum
    Join Date: 2004
    Post Count: 18
    Just a quick question???????????
    “Alpine property has very different rules to other investments”

    No I meant Alpine Properties are different in the way you market them , rent them ect as you earn your income over a very short period of time. They are also on leased land not frehold so there are a lot of checks you need to do such as term left on the lease and requirements for renewal and the cost associated with this.

    Yes I have an independent audit done, I do the remaining books myself.

    ASB Alpine

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