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Do you know about Stamp Duty Concession on certain asset transfers in Self-Managed Super Fund?

Are you a property investor?

Are you a trustee of SMSF?

 

Then you should read this article carefully. 

Aside from the lower tax rates which apply within a self-managed superannuation fund, the trustees of SMSF can also take advantage of the valuable stamp duty concession provided by Revenue NSW.

 

Buying commercial real property under a self-managed superannuation fund (SMSF) is seen as a common strategy. But how about if you have already owned commercial properties? 

 

Not everyone knows that you can also take advantage of the valuable stamp duty concession provided by State Revenue, which could save thousands of dollars in duties and taxes along the way. 

 

This concession can be very significant.  If the SMSF purchases NSW land/property from a member with a market value of $900,000, the duty which would apply (but for the concession) is $35,835.0.  With the concession, the saving in duty is $35,335.0.

 

Here is the current breakdown on stamp duty for property investors or small business owners looking to move property they own personally in to their SMSF.

 

Stamp duty imposed by State and Territory governments should always be considered before transferring land to an SMSF. Concessions or exemptions from duty may be available depending on the State or Territory.

 

Reminder:  the land/property must be business real property owned in the personal name of the member of SMSF rather than a company. Certain trust is also eligible as a landowner but please check with our SMSF specialist at BOA & Co.  

 

The following tables set out the details of the stamp duty offices and relevant provisions of the relevant legislation in each State and Territory. This is up to date as at 27 February 2017.

 

NSW

Transfer to an SMSF
Duty payable $500 subject to conditions being met. Previously $50 but increased 01/07/2014. Depending on the documentation in place for the transaction you may be able to apply for a retrospective re-assessment and obtain a refund. An SMSF specialist lawyer would be able to advise you on this.
Relevant provisions 62A NSW Duties Act 1997
General description of legislation Nominal duty is charged on a transfer of dutiable property from a person to a trustee of an SMSF where the: transferor is the only member of the super fund or the property is to be held by the trustee solely for the benefit of the transferor (ie property or proceeds of the sale of the property cannot be pooled with property held for another member and no other member can obtain an interest in the property or proceeds of sale), and the property is to be used solely for the purpose of providing a retirement benefit to the transferor.
Documentation Evidence that it is a complying SMSF as at the date of the agreement/transfer, copy of minutes of meetings of the SMSF stating the intention to have the property transferred to it and confirm that the property was owned beneficially by the transferor member, copy of the SMSF trust deed or a variation to it, showing a non-revocable clause that the property is segregated for the transferor member’s benefit only (follows wording in section62A(2))
Legislation Duties Act 1997 (NSW)
Legislation website http://www.austlii.edu.au/au/legis/nsw/consol_act/da199793/
Office Office of State Revenue
Website http://www.osr.nsw.gov.au

 

VIC

Transfer to a super fund

Duty payable No duty subject to conditions being met
Relevant provisions Section 41 Vic Duties Act 2000
General description of legislation No duty is charged in respect of the transfer of dutiable property made without monetary consideration to a trustee of a super fund, where there is no change in beneficial ownership (again, the property must be held in the personal name of the member and not a company name). A transfer of property to a trustee of a super fund by a beneficiary of the fund does not, for the purposes of this section, effect a change in the beneficial ownership of the property.
Documentation Documents are required – refer to ‘Evidentiary Requirements for Dutiable and Exempt Transactions’ on SRO website
Legislation Duties Act 2000 (VIC)
Legislation website http://www.austlii.edu.au/au/legis/vic/consol_act/da200093/
Office State Revenue Office (SRO)
Website http://www.sro.vic.gov.au/land-transfer-duty

 

QLD

Transfer to a super fund

Duty payable Ad valorem duty applies
Relevant

provisions

No provision for exemption or concession from duty
General description

of legislation

A transfer of dutiable property is a dutiable transaction.
Documentation Duties office form and documents are required.
Legislation Duties Act 2001 (QLD)
Legislation

website

http://www.austlii.edu.au/au/legis/qld/consol_act/da200193/
Office Office of State Revenue
Website http://www.osr.qld.gov.au/duties/index.shtm

 

There are also other conditions which have to be satisfied. For example Revenue NSW requires evidentiary documentation before these concessions can be granted. 

Do you think you may qualify for these stamp duty concessions? Call BOA & Co. on  02 9904 7886 and our SMSF specialist will be pleased to assist you.

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smsf property investment

5 Mistakes on Self-Manged Super (SMSF) Property Investment

Deciding on getting into property investment through the self-managed super fund or SMSF is something worth considering. If you take into consideration the volatility of the stock market, low-interest rates, and tax concessions, it makes a lot of sense. So what do you need to know?

 Here are 5 Common Mistakes when considering property investment through SMSF

  1. High leverage on SMSF property investments
    • Heavily rely on bank loans when investing property within SMSF might be problematic. High loan-to-value ratio (LVR) could be feasible when investing elsewhere but SMSF loan is more strict and less options in loan market. Most lenders require positive cash flow (i.e. no Negative Gearing allowed) considering acquisition of property in SMSF.
    • Having a combined balance of $200,000 for husband and wife investors could be a starting point of thinking property strategy in SMSF. 
    • The loan-to-value ratio is lower for an SMSF loan than for residential property from most of the lenders. You would need a 25-30% or more deposit when borrowing to buy a property.
    • Lenders view SMSF loans as riskier, and hence a high-interest rate because they consider it a commercial loan even if it purchases residential properties. 

     

  2.  Buying an inappropriate property
    • Not getting a good return on investment, invest in areas that overly supplied or show inconsistent capital growth.
    • Balancing with right rental yields and capital growth is critical. Thinking high capital growth without required rental income leads to insufficient cash. 
    • Investing in bad or volatile areas could make you lose your money quickly.
    • Consider supply vs. demand. You will get good rental returns if you get a good location with low supply

     

  3. Carefully buying off-plan in SMSF
    • Buying off-plan can be a risky move if you do not do your numbers correctly.
    • Undertake a cash flow analysis into your fund with a buffer because you might guess wrong after a few years when settlement, it might not be as what you thought initially. For example considering higher interest rates and lower rental income when doing the analysis.
    • Improper valuation and conservative quotes by banks can lead to problems in future. 
    • If you must buy off-plan, purchase somewhere with strong demand and solid rental return. You avoid the oversupply of apartments that are prevalent in some areas.
  4. Too late to start SMSF property investment
    • Aim to invest for long term (a minimum of 10 years), before the retirement age of 65.  Never too early to start SMSF just to do the maths right. 
    • If possible, start as early as 45 to realise the true potential of investing
    • Investing in property is typically for 10 to 20 years; banks are wary of short-term loans
    • If you are pooling funds from other members, you must also consider their ages, how close they are to retiring, risk tolerance and your ability to manage the funds to the advantage of all members

     

  5. All in property is risky
    • Property is good investment asset to be held in super, but still needs to diversify.
    • Right level of cash reserve mixed with other liquidiable investment is healthy strategy just because real estate is not liquidable asset with a higher transactional cost when selling.
    • Diversify your SMSF to have a well-rounded portfolio
    • Have a good buffer of assets and only invest in property when you have sufficient resources
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BOA & Co. Policy changes

Policy Changes for SMSF Customers & Those Requesting Interest Only Lending

Policy and Process Changes for SMSF Customers & Customers Requesting Interest Only Home Lending.

Today, BOA & Co. is implementing policy and process changes for when we lend to Self-Managed Super Funds. These changes will apply to both Home Lending and Business Lending products.

On Saturday 1 July 2017 some additional changes will be implemented for Interest Only Home Loans to ensure Boa & Co. continue to apply responsible lending practices when assessing a customer’s ability to service existing and proposed debts.

These changes will help us protect the interests of our customers and ensure we continue to meet our regulatory requirements.

What’s changing?

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