Ascientials - SMSF Alert

SMSF Property Rules are Changing

Many of you will already be aware of the Federal Government's announcement yesterday regarding the purchase of investment property inside a self-managed super fund. If you have already been considering purchasing an investment property through your SMSF, this is something worth looking at promptly.

In response to the proposed changes, the Asciential network has been proactive in sourcing SMSF-suitable property opportunities for clients who may already be in a position to move forward. Please contact me as soon as possible if you'd like to discuss.

These opportunities will not suit everyone, and any decision must be made carefully and with the right professional advice. However, for clients who already have an SMSF established, or who are already well advanced in the process, there appears to be a limited window to consider suitable options before the proposed changes take effect.

Additional Useful Information

In simple terms, the government has agreed to support changes that would prevent SMSFs from entering into new Limited Recourse Borrowing Arrangements, commonly known as LRBAs, to purchase residential property. This essentially means that, if you were thinking about buying an investment property in an SMSF and the fund will need a loan to do so (the normal situation), you will no longer be able to once the new rules come into effect.

This does not appear to be law yet. However, based on the current information available, the change is expected to commence 45 days after the relevant legislation receives Royal Assent.

Royal Assent normally happens after the legislation has passed both Houses of Parliament. As a rough guide only, if the legislation is finalised in late June or early July, the practical cut-off could fall somewhere around mid-to-late August. Please treat that as a best estimate only, not a confirmed date.

The main point is that the available timeframe may be limited.

For those who have not yet set up an SMSF, time is tight. It may still be possible in some cases, but that would depend heavily on how quickly your accountant, SMSF adviser, solicitor and finance team can move.

This is not a recommendation to establish an SMSF or to purchase property through super. SMSF property investment is highly regulated and must be appropriate for your personal circumstances, your fund’s investment strategy, and the relevant superannuation rules.

However, if you have already been considering purchasing an investment property through your SMSF, I suggest you contact me as soon as possible so we can discuss whether any of the currently available SMSF-suitable opportunities may be relevant.

Before proceeding, please also consider the checklist below.

SMSF property purchase readiness checklist

• Do you already have an SMSF established?

• Does your SMSF investment strategy allow for residential property investment?

• Have you spoken with your accountant or SMSF adviser?

• Is your bare trust or custodian trust already established, or able to be established quickly?

• Have you spoken with your lender or broker about SMSF borrowing capacity?

• Do you have sufficient cash available inside the SMSF for deposit, costs and liquidity requirements?

• Are you in a position to move quickly if a suitable property becomes available?

If this is relevant to you, please contact me as soon as possible.

Warm regards,

Peter Ward

Managing Director

E: peterward@apginvest.com.au

M: 0404 02 6000

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