STRATEGY
SMSF property sale complexities
Disposing of property held in an SMSF involves additional legislative considerations, Jeff Song writes. Real estate investment continues to be a popular investment choice for SMSF trustees. Like with any investment, there will come a time when real estate needs to be sold. When considering whether to sell, trustees should be mindful of the relevant compliance requirements that need to be observed until the property has been completely transferred out of the fund. There are also a number of other important issues to consider in these circumstances. JEFF SONG is superannuation associate division leader at Townsends Business and Corporate Lawyers.
60 selfmanagedsuper
Retirement objective The first question trustees need to ask themselves is: “How is the proposed sale in line with the purpose of providing retirement benefits to the members?” It may be a simple question to ask, but is not necessarily easy to answer as it requires a survey of all circumstances relating to the fund and the members.
Let’s consider the following example: • an SMSF has two members who are in accumulation phase, • Fund Pty Ltd as the trustee of the SMSF acquired an investment property for $500,000 that is now worth $1 million, • the property is leased to a related company, Family Pty Ltd, controlled by the members to run a family business, • the current market value of the family business is $1 million, • an unrelated investor approaches them and offers $2 million to purchase both the property and the business, • Family Pty Ltd plans to purchase another business for $1.5 million after selling its current business, and • the parties are negotiating the terms of two interdependent contracts, one for the sale of the property and the other for the sale of the business.
