Do not overlook the essential requirements to maintain and retain evidence which determines that the ultimate trustee of your super fund is in the ‘real’ purchaser of your super property.
If you borrowed funds for the purchase of property by your super fund, under the Limited Recourse Borrowing Arrangements (LRBA) under the Superannuation Industry (Supervision) Act 1993 (the SIS Act), you will have established a ‘bare trustee’ or ‘custodian trustee’ (also known as the apparent purchaser) to hold the property until such time as the borrowings have been repaid, at which time you should then transfer the property to the ultimate trustee for your super fund (also known as the real purchaser).
It is at this time that those carefully maintained and retained documents are required:
Upon the transfer of the property to the real purchaser, duty would be assessed on the value of the property and payable by the real purchaser, unless you can establish that the property was effectively paid for by the real purchaser and had previously paid duty, in which case an exemption of duty would be available. This is where your meticulous efforts in maintaining your documents will be rewarded.
You will be required to fully satisfy the Revenue Office in the particular state that your property is situate[1] and provide evidence as to the loan details, the payment of duty, deposit and purchase price by the real purchaser, as well as other supporting documents.
The documentation you provide at the time of the transfer, is documentation which would have been kept at the time that the apparent purchaser was established, which may be some years prior. This information is provided for you now if you are intending to borrow funds to purchase property to be held in your super fund so that in years to come when you are making such a transfer to the real purchaser, you will have the documents kept correctly in order to make application to the revenue office in order to satisfy the requirements for the exemption of duty, ie efforts rewarded:
- All evidence as to payment of duty, deposit and any part of the purchase price must be in the name of the apparent purchaser on behalf of the super fund. Such evidence will include receipts, bank statements and financial documentation.
- Your loan document will be prepared in accordance with the SIS Act and must be retained.
- The Contract for Sale and evidence that duty was paid. Be careful to ensure that your purchase Contract is prepared in the name of the apparent purchaser and real purchaser and the name of the super fund, to provide clarity as to ownership requirements.
- Any other documentation relating to the purchase which may be required in further support.
- The super fund deed and any variations or changes.
Be careful and take the time now, to have your documentation prepared correctly, and records kept which accurately reflect the ownership, so that you are not faced with a potential unsuccessful application for exemption of duty!
We are experienced in documenting correctly the contract documentation for the purchase under the LRBA, and having the records accurately reflect the position, as well as being experienced in making application and arranging transfer of the property, at the time that the borrowings are repaid and the real purchaser is to become the beneficial owner. This is of course subject to full financial and accounting advice you should receive from a SMSF financial professional.
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[1] In this case, this information is restricted to either Victoria or New South Wales.
