This old house cannot be repaired in an SMSF: Townsends Business & Corporate Lawyers
- Renovating property inside an SMSF – property must be freehold
- This old house …….. Can let you down if not following SMSF rules
- Wealthier SMSFs More Likely to Fund Renovation of Ungeared Properties
Some investors have misconstrued the ATO’s decision to allow SMSF’s to renovate older residential housing.
Many have missed the point that renovations can only occur for ungeared property if trustees are seeking favourable tax treatment for the work done.
What has always been allowed for any property is the ability to provide maintenance and repairs which are tax deductible within clear criteria.
“Some SMSF trustees borrowed money to buy an older property and are stuck with a deteriorating asset on which they cannot carry on renovations.
“The ATO has given no indication that the rules on renovating older properties will be changed to allow geared residential properties to be renovated.
“To have the capacity to buy a property freehold and then renovate to add significant value is more in the realm of wealthier SMSF’s where cash is available to make a large capital purchase such as a property. SMSF trustees wanting to add wealth with renovation strategies need to ensure that sufficient cash is available and that contributions (if needed) can be made to finish the renovations,” said Peter Townsend, Managing Director, Townsends Business & Corporate Lawyers.
“The sole purpose test has to be observed in any transaction inside superannuation. The usually long-term nature of renovation process has to be shown to fit that test. The sole purpose test demands that superannuation is used to benefit the member in retirement, not when the property market comes good,” said Mr Townsend.
Media Enquiries:
Peter Townsend
Managing Director
Townsends Business & Corporate Lawyers
02 8296 6266
Mobile 0419 44 88 44
peter@townsendslaw.com.au