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Property Revaluation & SMSF

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Do properties held by SMSF need to be revalued every year?

Currently, there is no specific legislation that requires properties held by SMSF to be revalued every year. However, independent SMSF auditor will require the financial statements presented to be a fair and accurate representation of the assets of the fund. The auditor must be provided with evidence that the valuation of any property held by SMSF is valued accurately enough for them to sign off on their audit report.

The general rule of thumb used by the majority of SMSF auditors is that property investments held by a SMSF must be valued at least every three years.

There are some situations where property held by a SMSF must be revalued on a more frequent basis:

  1. Commencement of Pension – a valuation from within 12 months prior to the commencement of the pension must be used.
  2. Where the SMSF has in-house assets and the auditor needs to ensure that the 5% in-house asset ratio has not been exceeded.

The most important and common situation from the above is when a pension is commenced. If the members are still contributing to the fund and potentially starting a new pension each year, the trustees will be required to undertake a valuation each year. This is explained in the Tax Determination TD2000/29.

Who can undertake the valuation?

Valuations can be conducted by;

  • Independent valuers
  • Real estate agents
  • Other unqualified persons(including trustees of the fund)

SMSF independent auditors generally will prefer a valuation from an independent party rather than the trustees of the SMSF. However, the auditor may accept the valuation from the trustees if the evidence is presented to show that the methodology used to prepare the valuation is objective, based on a reasonable process and all relevant factors have been considered.

For example, when determining the valuation of property, the following factors would be considered:

  • The value of similar properties
  •  How much was paid for the property
  • Valuation for council rates purposes
  • Independent appraisals
  • Rental yield

For SMSFs that hold residential properties and the trustees wish to prepare their own valuation, they should obtain either a sales history report or a suburb sales history report from RP Data. These reports are cheaper than full independent valuation, and they can form the basis for the valuation of the SMSF property.

For commercial, industrial and more unique properties held by SMSF, valuation process will be complex than residential properties. Auditors may require more detailed valuation evidence than the case for residential properties. In these cases, an independent appraisal obtained every three years would be appropriate.

Do you have any questions on properties held by SMSF?

Please call Superhelp for more information on 1300 736 453.

How to convert your SMSF into a corporate trustee from an individual trustee

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There are many reasons why using a corporate trustee is better for your Self Managed Super Fund than individual trustees. The cost of registering a company far outweighs the savings which might be made, the convenience which would be achieved and the personal liability protection which results by using a corporate trustee for an SMSF.

What is involved in converting from individual trustee to corporate trustee for a SMSF?

There are several issues a trustee will need to look into when attempting this transition.

The Trust Deed

The trust deed is the first port of call with any action you wish to take with your SMSF, so you need to make sure your SMSF’s trust deed permits the use of a corporate trustee. If it doesn’t, you will need to update your deed to allow corporate trustee. If it does, follow the rules in the deed for the resignation of the individual trustees and the appointment of the corporation.

Create and Register a Company

It is always best to use a company specially created to be your SMSF trustee only. You should avoid using an existing company such as your own business or the trustee of your family trust. This is due to problems that can arise when super fund assets become linked with family trust or business assets, and it can become difficult to verify which entity owns which asset.

Tax Office

Once the trustee change has been made, you will need to inform the Australian Tax Office as soon as possible.

Change the asset titles for SMSF investments

Once the trustee change has been made, all the assets owned by the SMSF will require the titles changed to reflect the new corporate trustee.  For example, account names on bank accounts, holder name on share registries and brokers and real estate property titles will require an amendment.

  • Bank accounts: Before you can make any changes to the account name, most banks will require to see the resignation of the individual trustees and the appointment of the corporation. They may also request company’s certificate of registration.
  • Share registries and brokers: Most of these will have similar requirements to your bank, however some brokers insist that your individual trustee account be closed and a new account be opened for the corporation.
  • Real Estate: In most states no or a nominal stamp duty will be payable, but you will need to prove to your State Government’s Revenue Office that there has been no change to the beneficial owner of the asset. This task must be completed by a solicitor.

How Superhelp can Help

Superhelp can help you in setting up a corporate trustee for your SMSF.

Please call us for more information on 1300 736 453

 

Are you “Retired” by the definition to set up a Pension?

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There are two types of Pensions you can set up in a SMSF which are Account Based Pension & Transition to Retirement Pension.

Many clients are confused as to which Pension they should start. However, the fact is that there is really no choice. Depending on your age and your work status, you can only set up one or another. Below table sums up the mystics behind it;

pension defintion

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Benefits of owning your business property in a SMSF

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Many small and medium businesses adopt the strategy of owning their business premises through their self-managed superannuation fund (SMSF).

There are a number of benefits in adopting this strategy:

  •  An important business asset is held in a tax-effective structure (super is generally more tax-effective than other investment vehicles).
  • In the event of financial difficulty, creditors often find it more difficult to attack super fund investments.
  • By using the capital held in a super fund, a business can have more flexibility to make better use of its own capital to build or maintain the business.
  • By having your own SMSF to be the landlord, you have more freedom to add fixtures and fittings, additional capacity and make changes to the layout.

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Advantages of owning property through an SMSF

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There are a number of advantages to holding property inside an SMSF, as opposed to owning it in your own name.

1. Concessional tax on rental income

Where you hold an investment property in your own name, tax will broadly be payable based on your personal rate of tax, which could be as high as 46.5%. Similarly, if you were to hold an investment property through a company, the tax rate is 30%.

Due to the concessional tax rate that applies to superannuation investment earnings, rent received by your SMSF will be taxed at a maximum rate of 15%. And, because certain expenses related to the ownership of the property such as land rates, property maintenance etc will generally be tax deductible to the fund – the effective tax rate may come down even further.

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SMSF Property investments using a related unit trust

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Can a SMSF invest in property through a related unit trust?

An SMSF is prohibited from acquiring assets from a related party, except in limited circumstances. One of those circumstances is where the investment is an ‘in-house asset’.

SMSFs are limited to investing 5 per cent of the fund’s total assets in in-house assets, and where this limit is breached the fund trustee must bring the investment back within the 5 per cent limit within 12 months after the year of the breach being identified.

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Franking Credits are Super for your SMSF

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One of the advantages of operating a self managed super fund (SMSF) is the ability to purchase investments that pay franked income. Being able to pick and choose your shares to ensure both maximum tax efficiency and a diversified portfolio is one of the big selling points of managing your own superannuation fund.

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SMSF Property Loans: Buying Property through your SMSF

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Super laws allow Self Managed Super Fund’s (SMSF’s) to borrow money for property investment. Investing in property through your SMSF can be a great way to diversify your portfolio and invest for your retirement. However, with any SMSF investment, trustees must comply with all setup, annual administration and accounting as defined by the Australian Taxation Office (ATO). This article will provide information on how you can use your super funds to invest in the property market.

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SMSF Investment Strategy

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An investment strategy is a detailed set of financial rules, behaviours or procedures which acts as a framework for a Trustee making SMSF investment decisions throughout the year. It is a guide for the trustee’s selection of an investment portfolio to increase members’ benefits for their retirement. The strategy should be designed around the current and future financial needs of the fund members and their risk adversities; some members will prefer to maximise expected returns by purchasing highly volatile investments, others will prefer to limit the amount of risk, but most will choose a strategy in between.

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