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A super fund has 4 members, each being a director of the trustee company. The super fund has purchased a property in India (overseas property). The property is purchased in the name of 2 out of 4 members and a declaration of trust has been provided. Would this suffice?
We are unable to find the exact provision on ATO website confirming that a separate entity needs to be established in such foreign country and that the SMSF must be the 100% shareholder in such company.
Kindly clarify.
Thank you.
Thanks Mihir for an interesting question.
From an audit evidence perspective, as you suggest, when testing to see that the Indian property is owned by the Australian SMSF, a declaration of trust should be made confirming that the trustees are the legal owners of the property and hold it on trust for the SMSF.
In relation to a provision requiring that overseas properties are held by a company, I can confirm that there is no such provision. What I suspect you are referring to is that in some overseas jurisdictions, it is not possible for foreign-residents to directly own real estate. For example, if an Australian SMSF wants to purchase real estate in the United States, it is common practice for the Australian SMSF to subscribe for all the shares in a US Limited Liability Company ('LLC"), and then have the US LLC acquire the real estate which is located in the United States.
This arrangement is not driven by the requirements of Australian tax law, but more the requirements of the law in an overseas country as to how real estate can be owned by foreign residents.