Transferring commercial property into your Self-managed Superannuation Fund

Usually assets owned by related partied cannot be transferred to your SMSF or acquired by your SMSF. However,Listed Managed funds, listed shares in companies and certain types of property (Business Real Property) are all able to be transferred to your self-managed super fund.

A business real property can be transferred to your SMSF. A business real property is either a piece of land or a building that is used exclusively for a business (e.g. a commercial property). An added bonus of having a commercial property transferred is that the members of the SMSF are allowed to operate their own business from the commercial premises provided they are paying a market rate of rent to the SMSF. Please note that residential property owned by a related party cannot be transferred into SMSF.

There are two ways that members of the SMSF can transfer business real property to the fund:

1. Non cash contributions
2. By selling the property to the fund

When transferring as a non cash contribution you need to ensure that you do not exceed the contribution cap limits. On the other hand when selling the property to the fund you need to ensure that the SMSF has adequate funds to purchase the asset. Note that the SMSF can also borrow funds from the bank via Limited Recourse Borrowing Arrangement to fund the acquisition.

If there is an existing debt owing on the property you need to ensure that the debt is paid off before you can transfer the property. The debt can be paid off easily in the event the SMSF is acquiring the property. However, in the event of a non cash contribution this could prove a little difficult unless you have funds available to pay off the existing debt.

Another important consideration is to ensure that the property is acquired or transferred based on the current market value. The market value of the property needs to be determined by an independent valuer.

It is also important to factor stamp duty and capital gains before undertaking such a transaction. With careful planning by your tax accountant and lawyer you can significantly reduce the impact of capital gains tax and stamp duty.

It is important that you seek advice from an experienced SMSF accountant that specialises in this area as getting this incorrect can prove to be very costly. Sydney accountants iTrust Tax and Accounting can provide expert advice when it comes to this type of transaction.

Rizwan Inayat is the Director of iTrust Tax and Accounting. He has over 10 years of experience in tax, accounting and financial services.