The Australian Taxation Office (ATO) expressed concern for trustees of self-managed superannuation funds (SMSFs) investing in property, warning trustees to be cautious when making property investments as it can be confusing for those who don’t understand their legal obligations.
“The finer details are important; trustees need to be sure that property is the right investment for their SMSF and that the arrangement is legal,” said ATO in a recent statement.
“Some investment property arrangements, if structured incorrectly, cannot be resolved simply,” says OBT’s Wealth Specialist Rodney Turner. “Often the only way to fix the situation may be to undo the arrangement which could force the sale of assets at an inconvenient time. This can prove to be an expensive option for the fund potentially incurring stamp duty and tax liabilities.”
ATO cited common examples of incorrect property arrangements such as holding trusts that have not been established at the time the contracts to acquire were signed and gearing in a related unit trust, or where the title of the property is held in the individual’s name rather than the trustee of the holding trust.
What this means for Trustees
In line with ATO’s Stronger Super legislation, you should review your fund’s investment strategy to ensure that it continues to reflect the purpose and circumstances of your fund and its members. Reviews should occur on a regular basis and should be evidenced by documenting decisions made in the minutes of meetings held during the income year.
How OBT can help
We can assist you with a review of your current investment strategy to ensure that it continues to meet the needs of your changing circumstances and life stages. We can also provide you with guidance relating to meeting your SMSF compliance requirements.
OBT’s Financial Planning team is happy to assist you with these and other SMSF issues. Call us on 07 5462 2277 to make an appointment.