Beware The Rules of Super And Property

In the new financial year, many DIY super funds will try to expand the diversity of their investment strategies. Including a residential property in a fund’s portfolio is beginning to be a popular choice. There are a number of rules and dangers, however, that potential investors should be aware of.

Most importantly, a fund cannot buy a property owned by a fund member or someone related to that member. Although a fund can acquire investments from a related party, such as shares, commercial property or units in certain managed investment trusts, it cannot purchase a residential property from a related party.

Some funds might wish to strategise and get around this prohibition by creating a unit trust. A unit trust is an arrangement whereby money from different investors is pooled to buy an investment. The value of the investment is converted into units which are issued to investors in proportion to the money they invested.

A family home, or residential property owned by a fund member, could be invested in by a unit trust. The fund will run into problems however, if it is entitled to more than half the units. Under super rules, where an asset is an in-house asset, no more than 5% of the market value of the super fund’s assets can be committed to the investment.

There are severe penalties if it is established that a unit trust was used to circumvent the prohibition on acquiring assets from related parties.

Investing in property might still be a good super fund strategy and it is worth considering the range of properties available. If a fund is going to diversify in the new financial year, be sure to get professional advice and ensure that the property investment does not break super rules.

Comments are closed.

NEWS

NOTICE: Regarding Unsolicited Emails

We have recently learned of unsolicited emails that are being sent out, claiming to be “Fusion Financial Services” which typically contain the subject line “Invoice Is Ready For [Insert Name].

While the sender may appear to be The Fusion Group, we want to confirm that this is not the case. The email includes a virus in the form of a Word document, claiming to be an invoice from Fusion. In the event that you receive an email that fits this description, close the message immediately and report it as spam.

Thank you,
The Fusion Group

Controlling your Self Managed Super

Self Managed Super Funds (SMSFs) continue to grow in popularity. What is the large appeal that prompts so many people to go their own way despite all of the obligations and responsibilities of being a trustee – and being regulated by the Tax Office? … more

Are Your Inactive Bank Accounts at Risk?

We’ve all heard about the “lost billions” sitting in idle superannuation funds around Australia but are you aware of what’s happening to hundreds of millions of dollars sitting in “inactive” bank accounts? Read on, you may be very surprised. … more