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Can I combine my SMSF and residential property?

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I have a residential property and am thinking about setting up a self-managed super fund to roll the investment into the fund. Is that possible? And could I buy land and build a house and then sell it inside a super fund?

On your first question, the answer, regrettably, is no. You cannot transfer or sell an existing residential property you own into your SMSF. You could do this with a real business property, say where you run a business but not a rental residential property. You might think it’s a business but the ATO sees it differently.

On the subject of buying land and building a property inside super, the answer is yes but you will have to use the existing money in the super fund. You can use borrowed funds to buy an existing piece of real estate, that is a house or an apartment, and you can now renovate them but once again you have to use existing funds in the SMSF for the renovation.

On the subject of buying land, building a house and selling it, as it’s like holding shares and waiting for the capital gain before selling them, it’s therefore acceptable to do so provided it’s consistent with your written-down investment strategy that all SMSFs should have.

A SMSF is created for the sole purpose of building up the value of your assets for the time when you retire and so if you take any action that isn’t consistent with this sole purpose test then you could be in trouble with the ATO.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Thursday, December 15, 2011

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