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I have received an Audit and the following is noted:
- 1 Member and is 65 years old.
- Has property and bank loan.
- Net amount of property at valuation less loan have been paid out as lump sum to member.
- The property and loan have been transferred to the member. Member doesn't have any other property.
- Fund is in process of winding up.
Is this possible? I believe the property needs to be liquidated, loans paid out than remaining could have been taken up as lump sum. I would really appreciate some guidance.
Hi Shalendra
I discussed your issue with a SMSF lawyer and their view was that the loan could be transferred from the Fund to the member as part of the property transfer.
Their view was that the loan would in effect need to be refinanced and the appropriate paperwork done to transfer the liability from the name of the Fund to the member.
Thanks
SMSF AAA
Hi Shalendra
As a starting point yes a property owned by a SMSF can be sold to a related party of a Fund at market value or it can be transferred in-specie to a member if they have met a condition of release (eg. reaching age 65).
Any transfer of property from a SMSF would need to consider stamp duty & capital gains tax implications. Stamp duty would need to be considered on a state by state basis. Capital gains tax may be avoided if the Fund is in retirement phase pension mode & there has been a partial commutation.
In relation to the transfer of the loan I have not come across this before so if other members have a view on this that would be appreciated. My initial thoughts are yes the transfer of property / loan could be done but I will look into this further.
Re the transfer of the loan you would also need to review the bare trust deed to see if it can be done. Preferably the lawyer that did the transfer of the property would consider the Fund's ability to transfer the loan to the member in terms of the bare trust deed and SIS legislation.
Thanks
SMSF AAA