SMSF in focus

Selling SMSF property in Australia

4 Things Consider When Selling SMSF Property

Are you one of the self-managed super fund (SMSF) trustees who consider ditching idle investment or selling SMSF properties for greater returns? Is it possible to sell your property to an SMSF member? You can sell residential property assets to a related party or fund member if the sale transaction is administered on a commercial basis. Still, there are many things you need to take into account. Finalising your investment decision based on the projected sale price alone is not enough because you need to consider more implications or consequences in the future.

According to financial advisers, there has been an upward spiral in property sales because trustees are looking for better-performing assets after their failed investments for years. Also, COVID-19 restrictions boost rental demand, capitalising on the buyer’s interests with new investment. But how do you know when it is time to sell or keep your SMSF property?

1. Tax Treatment and Retirement

First, you need to consider the tax effect of selling property in your SMSF, especially if you’re near retirement. If your trustee balance is under the transfer balance cap, you are not exempted for capital gain for selling while withdrawing pension. 

Any sale proceeds will connect to your transfer balance cap if you have an SMSF co-trustee and the property is separated from your member account or balance. Take note: the transfer balance has increased by $100,000 since July 1. So, if your balance is already more than $1.6 million next financial year, more of the capital gain is dismissed.

2. The Right Timing is Everything

You might ask yourself, “When is the best time to sell my property?” or “When can I maximise the tax effectiveness?”. 

The amount of capital gains tax that needs to be paid is lower if you sell your investment property during retirement than when employed. It is the reason why so many trustees have held on to their properties over the years. Also, you can only maximise your tax effectiveness if your pension is already in place for the whole year. 

In another instance, if you’re considering selling an existing property that is acquired by lending in your SMSF, you need to pay the loan entirely. However, it will be crucial to secure another property mortgage in the future because many larger banks are not offering SMF loan facilities anymore.

3. Restrictions on Contributions

After July 1, 2018, suppose you have a limited recourse borrowing arrangement (LRBA) or an existing loan at the beginning after that date and are currently in the pension phase. Then, the remaining loan balance will amount towards a trustee’s total super balance. Moreover, the trustee will not have to pay for non-concessional contributions if this is greater than $1.6 million.

If you’re about to retire, you may consider the bring-forward arrangement. It increases your superannuation by making extra non-concessional contributions without paying additional tax. Another option is to pay a huge amount of after-tax contributions to liquidate the arrears and boost the property revenue.

4. Ask Professional Advice

Don’t get excited with the high demands in property sales because you need to ensure selling the property will benefit your retirement and investments in the future. It is best to ask advice from financial advisers or SMSF experts before selling your property assets. That way, you can plan how to expand your SMSF to benefit you and your family.

Contact SMSF In Focus Today

Selling smsf property - Retirement plan and pension files.

At SMSF In Focus, we ensure that you will reap the benefits of your SMSF that you’ve been saving all your life. So let’s strategise a plan and create the income you need to sustain your lifestyle dream through Retirement Planning and Other Financial Advice.

Never miss an opportunity to sell some assets with greater returns. If you’re one of those trustees who don’t quickly buy what their real estate agent tells them, contact us, and we’ll analyse your situation to help you sell at the right time and reason.

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