Puzzle Finance Blog


Beware the pitfalls of real estate held in trusts and sting of breaking law


Search the internet with the words ''SMSF'' and ''real estate'' and you will see hundreds of hits from what appear to be property investment schemes.

The tax advantages of holding property in super are the lure. Many outfits are offering a one-stop shop with the property, the mortgage and the compliance and administration of the SMSF.

There will be invitations to seminars where investors will discover the secret to doubling their retirement savings and pay next-to-nothing in tax. But be careful.

Getting the structure wrong for holding property in an SMSF will attract big penalties. The Tax Office said last year that some trustees were using their superannuation funds to invest in property without fully understanding their legal obligations, or were deliberately flouting the law.

Responsibility for an SMSF cannot be outsourced.

Breaches of the law can result in a fund's trustees being disqualified and facing civil penalties of up to $220,000. The geared property is not actually held directly in the fund but in a holding trust, called a bare trust, which is a separate legal structure with the SMSF as the ''beneficial owner'' of the property. The correct sequencing is crucial.

It is important the SMSF is begun before signing the contract of sale for the property. The mortgage must be a special type called ''limited recourse'', meaning if the borrower defaults, lenders have recourse only to the property. However, lenders usually require the SMSF members to give ''personal guarantees'' over the loan.

That means if the lender has to sell the property and the sale proceeds do not cover the mortgage, the lender can recover the shortfall from the members of the fund.

Read more: http://www.theage.com.au/business/beware-the-pitfalls-of-real-estate-held-in-trusts-and-sting-of-breaking-law-20130830-2swcn.html#ixzz2eFipQ4BB

Posted by John Collett - The Age on 31st August, 2013 | Comments | Trackbacks
Tags:

Bookmark and Share

The trackback URL for this page is http://www.puzzlefinance.com.au/trackback?post=27218268


Trackbacks

There are no trackbacks for this post


Comments

There are no comments for this post


Post a Comment

HTML is not allowed in comments, http://... will be automatically linked.


Name (required):


Email Address (not displayed):


Comment (required):


To help prevent spam, please enter the word gear here:

Puzzle Finance Blog

About Puzzle Finance


Archives

September 2017
August 2017
July 2017
June 2017
May 2017
March 2017
February 2017
January 2017
December 2016
November 2016
October 2016
July 2016
June 2016
May 2016
April 2016
March 2016
February 2016
January 2016
December 2015
November 2015
October 2015
September 2015
August 2015
July 2015
June 2015
May 2015
April 2015
March 2015
February 2015
January 2015
December 2014
November 2014
October 2014
September 2014
August 2014
July 2014
June 2014
May 2014
April 2014
March 2014
February 2014
January 2014
December 2013
November 2013
October 2013
September 2013
August 2013
July 2013
June 2013
May 2013
April 2013
March 2013
February 2013
January 2013
December 2012
November 2012
October 2012
September 2012
August 2012
July 2012
June 2012
May 2012
April 2012
March 2012
February 2012
January 2012
December 2011
November 2011
October 2011
September 2011
August 2011
July 2011
June 2011
May 2011
April 2011
March 2011
February 2011
January 2011
December 2010
November 2010
October 2010
September 2010

Tags

Purchase or Rent (1)
The Age (1)