Buying property outright via esuper SMSF

[smk762]

I've got my eye on some acreage in a remote part of this fine nation, which I'm capable of purchasing without becoming imprisoned by debt via a bank loan, thanks to a healthy enough balance in my SMSF created with esuper, held in a CBA Accel cash account. Has anyone been down this road before and willing to share a map or tales of their experience?
Seems there is plenty of info of how to get a loan etc, but not so much available to tell you how to avoid decades of servitude to the masters of fractional reserve lending.

A secondary question involves improving the asset. Currently the acreage boasts the presence of a small vintage shack which will likely fail to remain upright in the period between now and my preservation age. I'd like to slowly replace it with a structure of similar size complete with off the grid infrastructure such as renewable energy sources and enough arable soil to ensure enough sustenance to keep me above ground and conscious well into my old age.

My understanding is that borrowing to fund this is not allowable, and I'm happy to work outside the debt system, but what are the limitations as it relates to maintenance vs improvement? Do I actually have to wait for the shack to fall over, or be declared unsafe? Are solar panels classed as an non-allowable improvement? Am I exempt from these concerns if not lending money to achieve it?

Thanks in advance for any wisdom those in the know can provide.

 

[SilverDJ]

You are not allowed to get any tangible benefit to yourself or any relatives from any investment made from within your SMSF.
So if you holiday at the property etc, that is not allowed. Also, I believe buying it entirely for your retirement use is not allowed either (ironically).
If it's not rented you could say you are buying the property entirely for capital gain, but to any auditor it would be obvious that you are buying it for your own use now or in the future. I don't know about the laws to maintain it under such circumstances, but putting in a solar system on a property you don't use or rent is a huge red flag, they won't believe a word of it.
This does not apply to commercial property. e.g. you can buy an office and then rent it out to your own company at market rates.

 

[smk762]

My short term intention is to get it in a decent enough condition to run a B&B or provide lodging for nearby foresters. I'd like it to provide some form of residual income during the intervening years.

It's right over the other side of the country so I won't go there often, at most once a year to make sure firebreaks are ok etc. No intention to holiday, I don't have time for that while I'm still productive enough to earn an income. Haven;t had one for 15 years and don't intend to start now.

Though I find the rule against buying it with the intention for future retirement use to be pretty crap, I'm 30 odd years from preservation and planning that far ahead generally never ends up the way it was in the beginning. Though I'd like the option of an in-specie disbursement upon preservation, if that's categorically out of the question, I still see it as a worthy investment.

If classed as a B&B, does that mean it is defined as a business real asset? If I theoretically retire into a care-taker role at the property in retirement (or transition towards), would that allowable?

 

[SilverDJ]

If classed as a B&B, does that mean it is defined as a business real asset? If I theoretically retire into a care-taker role at the property in retirement (or transition towards), would that allowable?

I think you are in uncharted territory there. Best to speak to an expert SMSF adviser/auditor.

 

[Gilligan]

I was thinking of buying a working farm, and partially managing it, to obtain both the land, an income source and a food bank, however, I was advised that I couldn't as it all needs to be arms length... This was being clarified for me though. Interested in your outcome, will advise mine when it comes through.

 

[Elemental]

I've got my eye on some acreage in a remote part of this fine nation, which I'm capable of purchasing without becoming imprisoned by debt via a bank loan, thanks to a healthy enough balance in my SMSF created with esuper, held in a CBA Accel cash account. Has anyone been down this road before and willing to share a map or tales of their experience?
Seems there is plenty of info of how to get a loan etc, but not so much available to tell you how to avoid decades of servitude to the masters of fractional reserve lending.

A secondary question involves improving the asset. Currently the acreage boasts the presence of a small vintage shack which will likely fail to remain upright in the period between now and my preservation age. I'd like to slowly replace it with a structure of similar size complete with off the grid infrastructure such as renewable energy sources and enough arable soil to ensure enough sustenance to keep me above ground and conscious well into my old age.

My understanding is that borrowing to fund this is not allowable, and I'm happy to work outside the debt system, but what are the limitations as it relates to maintenance vs improvement? Do I actually have to wait for the shack to fall over, or be declared unsafe? Are solar panels classed as an non-allowable improvement? Am I exempt from these concerns if not lending money to achieve it?

Thanks in advance for any wisdom those in the know can provide.

This is all in my own opinion and you need to seek independent advise etc.

Buying a property without a loan in your SMSF is the same as acquiring any other asset and subject to the same tests - must comply with the investment strategy, must meet the sole purpose test and you can't acquire from a related party etc. In essence, it's just like buying shares or anything else - what you probably can't do is purchase a business in your SMSF for the sole purpose of avoiding normal tax rates on the business if it was run outside of the system. If you are just renting it out to locals it's like any other rental property so I don't believe this would be an issue at all.

Improving the asset - if you are not borrowing then I don't believe there would be any issues. You could improve or even build and there aren't any rules against that as far as I know.

I think the biggest problem in all of this is the sole purpose test - look into that and you must satisfy yourself (and the auditor) that you satisfy that test.

Finally, I don't think there's any issue with disposing of the asset in specie to the beneficiaries as long as you meet a condition of release.

Obviously you have to do your own due diligence but on the face of it, it sounds ok to me.

 

[AngloSaxon]

If you are going to run a B&B as a company, then the company can rent the land off the SMSF without any problems. That's well established. The company has to pay rent to ensure its' an arms length relationship.