We would like to buy our daughter's apartment into our SMSF. She has the apartment rented through a real estate agency and treats it as an investment. Our daughter is not involved in our SMSF. Can we buy this apartment into our SMSF and if so, how? Advice to date is that it is not possible due to the 'arm's length rule' but we still think it is a good investment and would like to buy it. This is not as a favour to our daughter.
Sounds like a related party transaction to me.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Related party transaction. OK. Does it make a difference that the apartment has been rented out for a year and a half and that a valuation has been done on it? Is there any other way to do the deal?
You could still buy it however not within your SMSF.
This is a related party transaction.
A related party includes any member, a relative of any member, a relative of the spouse of any member, and an entity (such as a company or trust) controlled by one or more of the above individuals.
The definition of relative includes a parent, grandparent, brother, sister, uncle, aunt, nephew, niece, lineal descendant or adopted child of that individual or of his or her spouse.
As a result, only 5% of your asset holding in your SMSF can be used for a transaction of this nature.
Additionally, I often see people wanting to make transactions to achieve things other than profit – how is it any different if you buy the property next door that she lives in and rent that out, while she keeps on renting? Is buying a property in your SMSF the right strategy for you in the first place? So many questions that you should be asking before you jump into a transaction like that.
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