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Feb 14, 2022

Query about Property Transfer from Unit Trust to SMSF

in SMSF Technical Forum

Sub: Query Regarding Property purchased in Unit Trust

I have a below scenario and I will appreciate your feedback:

Three SMSF funds bought a commercial land in a Unit Trust – holding 1/3rd units each. No lending

Total units issued at the time of Land purchase in Unit Trust $300K each and now planning to construct three identical warehouses/factories and will contribute $600K each.

Hence each SMSF will have $900K unit holding in the Unit Trust once the construction is completed.

The property is held in the name of corporate trustee for the Trust, but the SMSF’s are the beneficial owners

If the SMSF funds want to take the ownership of one warehouse each from the Unit trust – what will be the stamp duty, CGT and GST consequences on the transfer of properties from Unit Trust to SMSF.

1 answer0 replies

Comments (1)

THE AUDITORS INSTITUTE

Feb 14, 2022

Hi Dharam

Thanks. I understand it is 3 SMSF's investing in a Unit Trust that owns property. I assume this is an ungeared Unit Trust investment covered by Regulation 13.22 of SIS.

Depending on the relations of the members of the Fund's to each other the Unit Trust may also not be a related entity as each Fund owns less than 50% of the Units.

You note that the SMSF's are the beneficial owners of the property. The SMSF's own units in a Unit Trust & the Trust owns the property.

In relation to your queries my view is more information is needed to comment. In relation to stamp duty this is a state by state tax. The GST issues will depend on whether the Trust is registered for GST, whether the Fund is registered for GST & the lease status of each property (re going concern GST rules).

In relation to CGT if the Trust transfers a property to a Fund this would normally be a CGT event & there would be a capital gain distributed to the unit holders.

Given the above the trustees of the Funds should get tax and legal advice in relation to the issues raised.

Thanks

SMSF AAA