{"id":1622,"date":"2023-07-28T05:20:56","date_gmt":"2023-07-28T05:20:56","guid":{"rendered":"https:\/\/actinvest.com.au\/?p=1622"},"modified":"2023-07-28T05:20:56","modified_gmt":"2023-07-28T05:20:56","slug":"from-purchase-to-lease-smsf-property-documentation-is-essential","status":"publish","type":"post","link":"https:\/\/actinvest.com.au\/index.php\/from-purchase-to-lease-smsf-property-documentation-is-essential\/","title":{"rendered":"From purchase to lease, SMSF property documentation is essential"},"content":{"rendered":"

Lease agreements for property must also adhere to non-arm\u2019s length regulations to avoid the scrutiny of the ATO, says an SMSF expert.<\/strong><\/p>\n

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In a recent webinar for The Knowledge Shop on SMSF and property, superannuation adviser Natalie Scott said lease agreements are an important aspect in providing evidence of NALI, particularly to the auditor, and also important in demonstrating a lease is on arm\u2019s length terms.<\/p>\n

\u201cWhere that is particularly important is when you have an SMSF that\u2019s leasing a property to a related party,\u201d Ms Scott said.<\/p>\n

\u201cThat touches back on the business real property definition. We can generally not have related parties in an asset that is owned by the SMSF.<\/p>\n

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\u201cHowever, if the property is used in a business and meets the business, real property definition, and we can lease it to a related party, we need to make sure that that lease is on arm\u2019s length terms.\u201d<\/p>\n

Ms Scott said the best way to prove to an auditor a lease is on arm\u2019s length terms is via the lease agreement.<\/p>\n

\u201cIt\u2019s best to make sure that the SMSF, or its trustee or accountant, is not preparing the lease agreement,\u201d she said.<\/p>\n

\u201cA lease agreement should be prepared by a legal adviser and accountants should not be doing that.\u201d<\/p>\n

Ms Scott said it also essential for a property\u2019s market valuation to be correct if it\u2019s being invested in.<\/p>\n

\u201cQuite often the property is the main asset of the fund, so it\u2019s really important that we have an accurate valuation and it reflects the true value of the property,\u201d she said.<\/p>\n

\u201cThe auditor is going to want to see documentation of that and it might require an independent valuation.\u201d<\/p>\n

When investing in a property, an SMSF has to have documentation and evidence from the beginning of the process, she said, including the initial deposit to ensure that NALI regulations are being followed.<\/p>\n

\u201cA lot of people want to pay the deposit out of their personal accounts and have a reimbursement from the SMSF once the transfer occurs, because in practice, what often happens is the person quite often will find the property before they\u2019ve set up the SMSF,\u201d Ms Scott continued.<\/p>\n

\u201cQuite often in those cases, you don\u2019t have the time to process the rollover into the fund.<\/p>\n

\u201cYou really need to look at other ways of paying the deposit. It is possible to have the SMSF reimburse the member for the deposit provided that the trust date allows for reimbursements and this can be done fairly quickly.<\/p>\n

\u201cWhile an SMSF could pay directly to the vendor for the purchase I would generally suggest making a contribution into the superfund and then making the deposit from there if the time allows.\u201d<\/p>\n

The next step in the documentation process is ensuring the contract of the purchase is in the correct name and that the settlement documentation is kept secure.<\/p>\n

\u201cThe amount of property purchases that I\u2019ve prepared that didn\u2019t have either the contract or settlement documentation is in the hundreds,\u201d Ms Scott said.<\/p>\n

\u201cIf you\u2019re aware of a sale happening, make sure you have a chat with your client about the importance of keeping the documentation and even suggest they send it through to you so you can have a copy on file for when you\u2019re doing financials for that year.\u201d<\/p>\n

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Keeli Cambourne<\/div>\n<\/div>\n<\/div>\n
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27 July 2023
\nsmsfadviser.com<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Lease agreements for property must also adhere to non-arm\u2019s length regulations to avoid the scrutiny of the ATO, says an SMSF expert.<\/strong><\/p>\n","protected":false},"author":1,"featured_media":1623,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[4],"tags":[],"_links":{"self":[{"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/posts\/1622"}],"collection":[{"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/comments?post=1622"}],"version-history":[{"count":1,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/posts\/1622\/revisions"}],"predecessor-version":[{"id":1624,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/posts\/1622\/revisions\/1624"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/media\/1623"}],"wp:attachment":[{"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/media?parent=1622"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/categories?post=1622"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/tags?post=1622"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}