When you become a client of ESUPERFUND, you are permitted to invest in Residential and Commercial Property for your SMSF. In relation to investing in Property for your SMSF, there are very specific rules and Regulations that must be adhered to and we strongly suggest that you familiarise yourself with them when contemplating purchasing Property for your SMSF.
Residential Property with Borrowings
Clients of ESUPERFUND are permitted to invest in Australian Residential Property where the SMSF borrows to purchase the Property. To simplify the Loan Application process, ESUPERFUND (via Beagle Finance Pty Ltd) has established a direct arrangement with Liberty Financial allowing clients to easily apply for an SMSF Loan online. For more information on borrowing in your SMSF to purchase Residential Property, please click here.
ESUPERFUND is an Authorised Credit Representative (ACR 413213) of Beagle Finance Pty Ltd ACN 140 290 268 (ACL 383640) which has a licence authorising it to arrange credit.
Residential Property with NO Borrowings
Clients of ESUPERFUND are permitted to invest in Residential Property where the SMSF does not borrow to purchase the Property. This includes investing in Residential Vacant Land. For more information on purchasing Property in your SMSF with no borrowings, please click here.
Commercial Property with Borrowings
For more information on borrowing in your SMSF to purchase Commercial Property, please click here.
Commercial Property with NO Borrowings
Clients of ESUPERFUND are permitted to invest in Commercial Property where the SMSF does not borrow to purchase the Property. This includes investing in Commercial Vacant Land. For more information on purchasing Commercial Property in your SMSF with no borrowings, please click here.
Property Purchase must be in accordance with the SMSF Investment Strategy
As a Trustee you must ensure all investment decisions are made in accordance with the documented Investment Strategy of the SMSF. Standard Property Investment Minutes can be found here.
Rental Income
The Rent from the Property Investment must be banked into the Transaction Bank Account established for your SMSF by ESUPERFUND.
Rental Expenses
The Expenses for the Property Investment must be paid from the Transaction Bank Account established for your SMSF by ESUPERFUND.
Accessing Information by ESUPERFUND
Rental Income and Expenses will be tracked by ESUPERFUND through the Transaction Bank Account where all income will be banked and expenses paid in relation to the property purchased. Where additional information is required (such as the Property Purchase Contract) we will request this from you as part of the Annual Checklist Process.
Depreciation Schedule
Clients who have acquired a Residential or Commercial Property in their SMSF may be able to claim tax deductions for depreciable items including carpets, furniture, fittings and so on. A Tax Depreciation Schedule for the property can be used to substantiate depreciation claims. Please note that the Tax Depreciation Schedule must be prepared by a Quantity Surveyor. A Tax Depreciation Schedule is a document that lists all the properties depreciable items, their effective life and the dollar value you can claim against your SMSF Income. For example if your annual depreciation claim was $5,000 you will save $750 in tax annually (ie $5,000 x 15%). For further information on obtaining a depreciation schedule for your property, please click here.
Invest in the Right Name
The owner of the Property will actually vary based on whether borrowings will be used to purchase the Property or not. For more information on what entity to include on the Purchase Contract when you are borrowing to purchase a Property, please click here. For more information on what entity to include on the Purchase Contract when you are not borrowing to purchase a Property, please click here.
Transfer (or Sale) of Residential Property owned by a Member to a SMSF
An SMSF Member cannot transfer (or sell) an asset owned by that Member (or an associate of a Member including family members by blood or marriage or entities controlled by the Member) to the SMSF unless the transfer is specifically allowed by legislation. Residential Property is not specifically allowed to be transferred by legislation. This means that you cannot sell or transfer a Residential Property that a Member of the SMSF (or associate of that Member by blood or marriage) owns to your SMSF.
Transfer (or Sale) of a Commercial Property from a Member to a SMSF
An SMSF Member cannot transfer an asset owned by that Member (or an associate of a Member including family members by blood or marriage or entities controlled by the Member) to the SMSF unless the transfer is specifically allowed by legislation. Business Real Property (ie property that is used wholly and exclusively in one or more businesses such as Commercial Property) is specifically allowed to be transferred from a Member (or an associate of a Member including family members by blood or marriage or entities controlled by the Member) to the SMSF at market value. However you will need to consider Capital Gains Tax and Stamp Duty Implications prior to making this transfer. See here for more.
Investment in the Family Home
It is expressly forbidden for an SMSF to invest in the Family Home of a Member (or an associate of a Member including family members by blood or marriage or entities controlled by the Member) irrespective of whether commercial rental is paid.
Investment in a Holiday Home
It is expressly forbidden for an SMSF to invest in a Holiday Home used periodically by a Member (or an associate of a Member including family members by blood or marriage or entities controlled by the Member) irrespective of whether commercial rental is paid.
Investing in Overseas Property
Clients of ESUPERFUND are not allowed to invest in overseas property. The rationale for disallowing overseas property investments is that overseas countries in most instances will not recognise the SMSF as the purchaser of the property. This means that the property is invariably purchased by clients in their personal names with SMSF monies. This is tantamount to a super withdrawal and using the monies to acquire the asset in the Trustees personal name. The ATO would not accept that the owner of the asset is the SMSF in this case and where the monies accessed were preserved, the SMSF would be severely penalised for illegal access of super benefits. Other reasons for disallowing overseas property is the difficulty in ascertaining who is tenanting the property as well as the additional complexity in converting rent and expenses from the overseas currency to Australian currency. This added level of complexity is outside the scope of our offering.
Residential Property must be rented to third parties unrelated to Members
Residential Property acquired by an SMSF must be rented out to third parties unrelated to you. This means you cannot rent a property to family including parents, siblings, children or your spouse. You can however rent the property out to unrelated friends.
Commercial Property can be rented to any party on commercial terms
Commercial Property acquired by an SMSF (ie Property that is used wholly and exclusively in one or more businesses) can be rented out to any party including to you or an entity associated to you to the extent that commercial rental is paid.
Investing all SMSF Monies in Property
A single asset strategy may be adopted by the SMSF if the asset proposed to be invested in is considered by the Trustee to satisfy the Investment Objectives and provided that the Trustees have considered the relevant Concentration Risk. By law, SMSF trustees must have an investment strategy which has regard to diversification. Investment decisions are a matter for SMSF trustees and it may prudent to seek financial advice.
No financial product advice or recommendation
No Advice Express or Implied: It is important to understand that ESUPERFUND has not taken into account any particular investor's objectives, financial situation or particular needs. ESUPERFUND does not provide financial product advice or recommend any financial products either expressly or implied. ESUPERFUND expressly states that it does not recommend, represent as suitable, or endorse any financial product or service available through ESUPERFUND. This applies in relation to the Liberty Financial SMSF Loan. ESUPERFUND does not advise or recommend that this loan product is suitable to a particular investor’s financial requirements or needs in relation to their SMSF. Any information provided in relation to the Liberty Financial SMSF Loan is factual information only about the features of the loan product and how data is made available to ESUPERFUND. Accordingly you should read the disclosures relating to the Liberty Financial SMSF Loan before making any decision about whether this loan product is suitable for your SMSF needs. We also recommend that you should seek professional advice from a financial adviser before making any decision to use the Liberty Financial SMSF Loan for your SMSF.
Australian Credit Licence and Credit Representative
ESUPERFUND is an Authorised Credit Representative (ACR 413213) of Beagle Finance Pty Ltd ACN 140 290 268 (ACL 383640) which has a licence authorising it to arrange credit.