Despite differing signals on the direction of the WA and national property markets, property remains a popular investment for SMSF trustees.
The rules in this space are complex, and most of the major banks no longer service the sector, with those that do offering somewhat unpalatable and restrictive lending terms.
Tracey presents the session ‘SMSFs & property development - tips, traps and pitfalls’, and she tells us about some of them here.
“The desire to undertake a property development in a SMSF is often driven the attraction to the concessional tax environment, but this should not be the only consideration” she said.
“There is still some misunderstanding on whether a SMSF can run a property development. It is often linked to discussions around whether a SMSF can run a business. A SMSF can technically do both. Of course, this is subject to meeting the compliance requirements applicable to SMSFs which we will work through.”
Tracey’s session will look at where a SMSF getting involved in property development can work, and importantly how and when it can all go wrong.
“Whilst a SMSF can undertake a property development, the question must be asked, should it? SMSFs and property can in the right circumstances be an excellent investment. However, rushing in where SMSFs are involved can be dangerous. My session will help attendees navigate through the SMSF minefield and highlight what can work but importantly what issues to watch out for. By setting out both the pros and cons, as well as the compliance issues to be alert to, delegates will have a roadmap to assist them in working with their clients.”
Tracey’s session will look at the use of alternative structures including unit trusts and joint ventures, SIS compliance and practical administration issues to watch out for, as well as tax and reporting obligations.
“Along with the SIS compliance issues other practical issues such as liquidity can be a very real issue. The reduction in contribution caps and the new restrictions imposed on non-concessional contributions will constrain many SMSFs. Trustees and advisers need to ask themselves questions like ‘What if a member dies part way through?’ and ‘What are the risks and strategies that need to be considered in addition to the development itself?’. This is after all, a complex space. For example, did you know that the tax treatment within a SMSF is limited to being treated as a capital gains transaction only?”
Tracey is a Chartered Tax Adviser, and a SMSF Specialist Advisor™ providing essential compliance, strategic and taxation advice to SMSF trustees and members as well as industry professionals. She provides specialist advisory services including family law matters involving self-managed superannuation funds, and is the author of a postgraduate university course in SMSF audit, and a regular presenter to trustees and industry professionals.
Of the rest of the day’s program Tracey said “The program for the Property Day is really practical, relevant and interesting. If I had to choose, the two key sessions I want to hear most are Anne Hurley and Oscar Dell’Anna (both HHG Legal Group) on ‘Contemporary Property Structures’ and Corey Beat (RSM Australia) on ‘Revisiting Kurts Developments and Other Income Tax Issues for Property Development’. For me these sessions fit together nicely and examine structuring, valuation and taxation issues.”
Other sessions at the event look at how automation and AI intelligence will affect property markets, the GST clawback on new residential property, foreign investment, state taxes, and financing.
Find out more about the program on our website and join us, 12 September at Crown Perth.