Can anyone fill me in on the rules about "arms length"?
I have an SMSF and want to sell my PPOR to the fund to release cash for another purchase. The property will then be placed with an agent for rental.
I have a feeling this cannot be done but can anyone give me the advice I need?
Cheers
Toni
I just went to a Metropole seminar today and they mentioned a SMSF fund can only purchase Commercial/Industrial property, not residential.
Look guys hate to say they are wrong.
A SMSF can certainly purchase a residential property and i have a couple of properties in mine.What they cannot do is purchase a property from a related party to the fund i.e husband owns a holiday home and sells it to the SMSF or indeed rent a property owned by a SMSF to a related party at a discount rent i.e mum and dad are trustees and rent the house to son and daugher and 50% of the market rent.
Hope this clarifies the matter.
Richard Taylor | Australia's leading private lender
Hi Tony,
I can confrm that your PPOR will fall under the arms length rules… and as such you CANNOT purchase it directly from yourself into the SMSF.
If you buy on the open market from a real estate agent then it is at arms length (providing that you aren't the vendor) ie your smsf can buy any property other than one owned by the members of the smsf.
Can't you refinance under your current ownership without triggering cgt or stamp duty costs?
If you must sell, why can't you sell your ppor into a trust? You will still be up for stamp duty etc. for the transfer.SNM Nothing to stop your SMSF buying on standard Residential property through a Real Estate agent as long as the Vendor is not a related party.
If you purchased a residential property using an Instalment warrant then you are unable to refinance or draw out more equity after ownership. (I think i understand the second part of your question).
Richard Taylor | Australia's leading private lender
Thanks everyone for your answers.
I will be keeping the property but as I have to borrow for another purchase, I thought it would be a great way to cash up and not get another loan as the new purchase would be PPOR.
cheers
Toni
See above.
Also, if you have a significant number of residential properties, and it is basically a full time job managing those properties, you can be deemed as being in the BUSINESS of managing residential property.
This means each of your properties could possibly be business real property so your SMSF can buy them from you – obviously you need to ensure it is worthwhile in terms of transaction costs (Stamp etc).
You would likely need the equivalent of at least 6 standard properties.
Cheers
EGrow SMSF | Grow SMSF
https://growsmsf.com.au
Email Me | Phone MeSelf-Managed Super Fund (SMSF) Specialist Accountants
Nothing wrong with wanting your cake and eating it too
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