Going Into Partnership With Your Super Fund
A question often asked is “how is it best to buy my next real estate asset”? Generally we always suggest doing this inside your self managed superannuation fund as part of tax minimisation. Doing this allows you to reduce your tax rate to 15% when repaying the principal of a loan.
Another option could be going into Partnership with your SMSF.
Going into partnership with your SMSF can be an option but has some issues that need to be addressed and managed. The common issues to address include:-
Ownership Type:- It must be acquired as tenant’s in common not joint tenancy.
Real Property:- In easy to understand terms this means real estate. Why is this significant? Generally a partnership will have a joint bank account which doesn’t meet the definition of real property. As such, the bank account cannot exceed 5% of the funds Assets – something to be monitored and could add a level of complexity to the administration which is undesirable.
Income and Expenses:- This must be done equally – you can’t send cash or share of income to either party without the proportionate amount being sent to the other party. The share must be in accordance with the legal ownership.
Security:- The asset cannot be used as security for any borrowings. This makes this more difficult for some banks and investors.
Want more information? Contact Justin Searle today on 07 4688 2500.
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