Can a member purchase a residential property from his own SMSF
Members of a SMSF purchased a
property in Gold Coast in 1988 with $200,000 and later on in 2003 renovated it
for a further $100,000 and rented in
out. On 30th June 2008 the fund
was valued at $3M and the property was valued at $500,000. Both members are now
over 60 went on pension on 1st July 2008. They decided to sell their
house in the country for $550,000 and move to their Gold Coast property which is
owned by the super fund.
Their accountant advised them that
they cannot live in the property since the value of the property is more than 5%
of the total value of the fund (Sec71).
The option the accountant offered: Since the members are on pension, the property cannot be paid to the member in-specie,
the accountant could perform an internal roll over (after updating the trust deed) and
revert the member balances to accumulation phase and since both members are
over 60, pay a lump sum to them and revert the balance back to pension phase.
The members see a problem with this option as once they roll over to accumulation phase
any lump sum payment may trigger a CGT event as the market value of the property
is currently $500,000. This option is a possibility however will cost $20,000 in
tax.
The member wants to purchase the
property from the SMSF whilst being on pension phase from money received from
sale of his own home.
Quiz 1) Can members purchase
residential property from their SMSF at market value (Sec 109)?
Quiz 2) When the members acquire
property (purchases or receive a lump sum) from
their SMSF, will he and his wife
(who are both individual trustees) be liable for Stamp Duty in QLD
Quiz 3) Will your answer be
different if the property was in NSW
Quiz 4) Will your answer be
different in (2) & (3) if the fund had a corporate trustee
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