Do consider how SMSF will eventually dispose of a property

Fund trustees should consider eventual disposal of a property even before their fund even buys it, says Martin Murden, director of SMSF consulting with the Partners Group in Melbourne.

For instance, many trustees plan for their SMSFs to own a direct property until the point of their retirement.

Such long-term planning helps minimise the risk of having to quickly sell a property to pay membe rbenefits or to switch to higher-yield investments in retirement.

Upon retirement, SMSF trustees can decide whether to:

• Sell the property to distribute retirement benefits to members. (If the property is backing the payment of a superannuation pension at the time of sale, no CGT is payable under current law.)

• Allow a member to acquire the property as a retirement benefit. (The trustees would have to consider possible CGT implications.) Some members use a former fund-owned property as thei rretirement home.

• Keep the property in the SMSF togenerate income for the members’ superannuation pensions.

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This article is part of Property Observer's free eBook: 21 do’s and don’ts for SMSF property investors.