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In this episode of The nestegg Podcast, host Maja checks in with our three experts to discuss this week’s biggest conversations about super, property and investment.

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Steve Waters, director of Right Property Group, talks about the current market and its growth prospects, hinting at a “revenge spend” period post-lockdown. Could property prices really inflate by a further 20 per cent?

Meanwhile, RMIT’s senior lecturer of finance, Dr Angel Zhong, talks about the earning season and dividends, delving into how companies decide distribution policy. Find out what is happening in the recent dividend announcements.

Last but not least, tax and super guru Timothy Munro talks us through the results of APRA’s inaugural super test and how engaged members should really be with their super. Timothy also touches on the super splitting law and what it means for relationship breakdowns.

Have a question for our experts? Get in touch at [email protected] and you might get featured in the next episode.

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There is $17.5 billion in lost and unclaimed super across ...

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Can I renovate the residential property I own through my SMSF?

By Peter Burgess, SuperConcepts

February 11 2016
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Invest

Can I renovate the residential property I own through my SMSF?

By Peter Burgess, SuperConcepts
February 11 2016

If your SMSF owns the property outright – that is, your fund has not borrowed to purchase the property – it is possible to renovate or improve the property.

Can I renovate the residential property I own through my SMSF?

By Peter Burgess, SuperConcepts

February 11 2016
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If your SMSF owns the property outright – that is, your fund has not borrowed to purchase the property – it is possible to renovate or improve the property.

However, if your fund has borrowed to purchase the property (commonly referred to as a limited recourse borrowing arrangement) and the loan or security trust is still in place, you are only able to make improvements/renovations that do not change the character of the property.

The ATO classifies this as when the character of the asset has been fundamentally changed. For example, a residential house that is converted into a restaurant or a vacant block of land that is subsequently subdivided resulting in multiple titles.

If the renovations/improvements are not financed by the SMSF, but rather are financed by the members themselves or another entity, the value of the improvement/renovation will generally need to be recorded as a contribution made to the fund and will count against the contribution caps.

It is important to note if the renovations are being undertaken by a builder who is a related party of the SMSF, the goods and material required to undertake the renovation should be purchased by the SMSF trustees directly from the supplier and not from the related party builder.

The issue here is the rule that prevents an SMSF trustee from acquiring assets, except for some limited exceptions, from a related party. A breach of the rules will occur if the related party builder purchases the goods and materials directly from the supplier and then invoices the SMSF trustees for the cost of those purchases.

As an alternative to the SMSF trustees purchasing the goods and materials directly from the supplier, it is permissible for a contract to be put in place between the related party builder and the SMSF trustees, such that the related party builder purchases the goods and materials as an agent of the SMSF trustee.

If you are thinking about renovating a property owned by your SMSF, you should consider seeking professional advice from a qualified financial adviser.

Peter Burgess, general manager, technical services and education, SuperConcepts

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