Finding an investment
partner is a smart move
Investing in properties in partnership with others via your SMSF can be a great way of getting property in your fund. However, there are many strict rules and requirements in terms of the day-to-day management and paperwork that you will need to be aware of – to ensure that your fund doesn’t end up breaching the super rules.
Although it is always best to invest in property via your SMSF on a standalone basis, some clients just simply can’t afford to do this. With house prices escalating, and the increased difficulty of finding a commercial property with a decent return, trustees are now more than ever looking for new ways to invest in property.
Investing in partnership with others can be a way that you can get the property into your fund, without having to fork out the entire purchase price on your own.
An SMSF can acquire both residential and commercial property in partnership with others. However, to ensure that the structure remains compliant, trustees must ensure that the partnership books are operated as if the SMSF is investing in the partnership on its own.
Essentially, the proportion of ownership must be carried through the books of the partnership at all times. The SMSF is entitled to its share of the partnership profits (i.e. rent) and must pay for its share of the partnership expenses (i.e. property outgoings including rates, water and sewage, body corporate and land tax).
If an SMSF enters into a partnership arrangement with other individuals, they effectively become associates of the super fund, and therefore the in-house asset rules may apply.