Land tax considerations highlighted for SMSFs with multiple properties
SMSF clients who are thinking about investing in multiple properties may want to consider separating these properties into separate super funds to minimise the potential land tax, says an SMSF technical expert.
Advisers Digest director Peter Johnson said that super funds may decide to use the same company for multiple bare trusts to save money on setting up another entity.
“If the bare trustee company is purely for the purpose of being the bare trust for another property owned by the super fund and nothing else, in that case, it may be okay to use the same bare trust company for that one super fund and only for bare trust arrangements for that super fund,” Mr Johnson explained.
“It’s okay to use the same company for multiple bare trusts, provided that’s all that company does, because effectively the super fund owns that property.”
However, if the super fund is looking to obtain finance from the bank, it is important the client or their adviser checks that the bank will accept that for a limited recourse borrowing arrangement, he cautioned.
Another important factor to consider where clients are planning to own multiple properties in their super fund is land tax, he said.
“If they’re all apartments with low land value, that’s fine, but if you’ve got a $500,000 block of land in one property and a $500,000 block of land in another property, you will have $1 million in total, you’re going to pay land tax and you’re going to pay a fair bit of it,” he warned.
“If you split that into two super funds, you’ll get two separate land tax thresholds in most states and you’ll save way more than the accounting fees in land tax.”
While clients may save money by having the small entity for everything, land tax is an important consideration, the director said.
Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
