Question of the week – Investment properties and SMSFs

SMSF technical expert and columnist for The Australian newspaper
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Q: Can a couple buy an investment property that their SMSF owns (at market price)?

A: Thank you for your question.

An SMSF can only acquire a limited range of assets from its related parties, which include the fund’s members, their relatives, close business associates and entities any of these control or are deemed to control.

This limited range of assets doesn’t include residential property. Typically, only business real property and listed shares are permitted.

An SMSF can, however, sell any asset to any of its related parties.

Any acquisitions and disposals between the SMSF and another party must be done on an arm’s length basis. Effectively this means the super fund can’t pay more for an asset than market rate (but can pay less) and can’t sell for less than market rate (but can sell for more). CGT and stamp duty for all concerned are generally worked out on an arm’s length basis.

If a transaction is completed that sees the super fund with more assets than it ordinarily should have, then the ATO generally deems the increase amount as a contribution for contribution cap purposes.

To answer your question – yes, however, only at market price.

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. Consider the appropriateness of the information in regards to your circumstances.