“Let's assume an SMSF has Victorian real estate allocated within the 200-499 or 600-699 ranges under the Australian valuation property classification code – that is retail premises, office premises, general purpose warehouse – and it has owned that real estate for many years meaning it is not currently covered by the CIPT regime.”

The SMSF then transfers, as an in specie lump sum, real estate to the fund members.

“A lot of people are not very familiar with commercial and industrial property tax. It is a very new tax, and especially if you have clients who have Victorian real estate, but are not from Victoria, you will probably get tripped up by it,” Figot said.

“The idea is that it is going to replace stamp duty. It's an extra tax of 1 per cent of the value of the land every year. So, the next time that land is transferred, it enters the regime. Land stamp duty is payable, but for the last time, and then in 10 years’ time the owner of the land has to pay 1 per cent of that land in tax in addition to land tax every single year.”

Advisers may be in a situation where one asset that a client is looking to remove is Victorian real estate, which falls under the definition of retail premises, office premises, or a general-purpose warehouse.

“Let's say the SMSF obtains an exemption, and here in Victoria, we do have an exemption if you transfer land from an SMSF to a beneficiary. However, it is not a guarantee that the client will get the exemption,” Figot said.

“They have to satisfy various evidentiary requirements. However, in this example, let’s assume the client gets the exemption. Does this property enter the CIPT regime? If you're not a lawyer, you can't advise on state taxes, but this is information which your clients will expect you to have.”

He said in this scenario, as there would be stamp duty exemption in place because the property is being transferred, it would not enter the CIPT regime.

“What if the SMSF, for some reason, failed to obtain the exemption? Then it's going to enter the CIPT regime, which means the acquirer, or the beneficiary, is still liable for duty, and in 10 years, will have to start paying one per cent of the property's value in addition to land tax. It could be quite disastrous and it’s something about which advisers should really be aware.”