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Debra Rieniets

Oct 30, 2023

Trustees wish to move the contract to purchase property out of fund -

in SMSF Technical Forum

The trustees of a fund wish to 'cancel' the purchase contract for an 'off the plan' property. At this point only the deposit has been paid.

The property was going to be owned by the fund. The property has not been built, the contract is nearly 2 years past the original 'handover' date. The trustees would prefer to invest the same monies in an established property, ready for rental. They do not wish to hold both properties in the fund.

Questions-

Can the trustees transfer the contract to the members privately, thereby freeing the fund to move to a more successful investment?
Will the transfer create a stamp duty event?
What do you think is the greatest issue with this situation?

2 comments

Comments (2)

THE AUDITORS INSTITUTE

Oct 30, 2023

Hi Debra

I have not come across this before.

I found an artilce re this topic (re the sale of the to be built property) at:

Can you sell off-the-plan properties before settlement? - realestate.com.au

The biggest issues will be:

Does the contract allow the property to be sold pre settlement. The trustees should get legal advice re this question. SIS does allow a SMSF to sell an asset to a related party as long as it is done on an arm's length basis.
What are the stamp duty implications of the sale. Will need to get legal advice re this as may differ on a state by state basis.
If can sell the property to a related party pre settlement how do you determine the market value of the property so that you comply with section 109 of SIS.

If other members have come across this issue before please let the forum know.

Thanks

The Auditors Institute

Debra Rieniets

Oct 31, 2023

Replying to

Thanks. I appreciate this as I also have not had this question asked before.