Chris Reed, director of the Business Concepts Group, said some auditors have always requested yearly title searches on property held in an SMSF, while others only do so when a property has been purchased.
“Some [trustees] are getting them done every two or three years, but certainly we’ve seen the ATO push forl auditors to do title searches more often,” Reed said.
“Title searches aren’t overly expensive. A property is potentially a big asset for a fund and the auditor needs to make sure that, firstly, the title is held in the correct name of the trustee of the fund, but also they’re checking that there are no mortgages or other charges put over that shouldn’t be there.”
He added that if the property has been purchased under a limited recourse borrowing arrangement, there will be a mortgage over it.
Reed said trustees may have to pay for a title search but if it is done through their auditor, accountant, or directly, it is a cost to the fund much like getting valuations or insurance for assets.
“Trustees should be prepared that the property title searches are going to be a common thing with their SMSF going forward,” he said.
“It is another compliance cost of the fund just like it is that all assets of the fund are insured, and that the insurance is held in the name of the fund or the trustees.”
He continued that insurance is not just necessary for property but also applies to other types of assets held within the fund such as artwork or other collectibles, and policies must be separate.
“It’s also important to make sure there is a separate insurance policy over that SMSF asset held in the name of the fund. We’ve seen a few SMSF trustees who have bundled the SMSF property insurance with their business property insurance and their business asset insurance,” he said.
“It becomes one big insurance policy which includes the SMSF asset, but that just doesn’t meet the requirements of the regulations in having the insurance over that asset held in the name of the fund.”
He added that even if it’s an asset hanging up in an art dealership, trustees need to ensure they have a separate insurance policy in the name of the super fund.
