Self Managed Superannuation Funds and Property Investment Part 2: Stamp Duty when Transferring Property Assets
Self managed superannuation funds (SMSF) commonly own real property, the acquisition of which normally attracts a payment of duty in accordance with the Duties Act 2000 (Vic) (“the Act”).
Whether the SMSF has purchased this property outright or though the assistance of a Limited Recourse Borrowing Arrangement (LRBA), duty is usually payable at the normal rates outlined in the Act upon acquisition of the asset. However, where the ownership of SMSF property is transferred either between trustees or between trustees and beneficiaries, certain exemptions may apply.
Transferring Property Between Trustees
Where a SMSF invests in property using a LRBA, two trusts are established to facilitate the loan agreement and ownership rights.The superannuation trust deed establishes a SMSF trustee as the borrower of the funds and the responsible person liable to pay all principle, interest, rates and outgoings associated with the loan.
The other trust is a bare trust where a bare trustee is appointed to hold the property on behalf of the SMSF until the loan has been repaid in full. Once the loan has been repaid, the bare trustee is under an obligation to transfer the property back to the SMSF trustee. This compulsory transfer of property between the bare trustee and the SMSF trustee is often free from stamp duty.
The trusts established under the LRBA will use provisions in the Act to render the bare trustee as the ‘apparent purchaser’ who must hold the real property on trust for the SMSF trustee as the ‘real purchaser’ of the property. Here, an exemption in the Act should apply to relieve further stamp duty on the transfer of the property from the apparent purchaser back to the real purchaser.
Transferring Property from the SMSF to the Beneficiaries
Where the trustee of the SMSF is the only beneficiary of the SMSF, another exemption may apply to exempt the transfer between the trustee and the beneficiary from stamp duty.
The Act may relieve certain other transactions from additional stamp duty where property is passed from a SMSF trustee to beneficiaries.
Usually these transfers are exempt from duty if:
- Duty was paid by the SMSF when the property was acquired; and
- The beneficiary was a beneficiary at the time of acquisition; and
- The value of the dutiable property at the time of the transfer did not exceed the beneficiary’s interest in the Fund.
For more information about stamp duty on SMSF property assets, contact Ron Cohen or a member of our Property Law Team at Tisher Liner FC Law.
