A guide to selling SMSF property

If you’re planning on selling your SMSF property, but don’t know how to go about it, here’s what you need to know:

Process for selling SMSF property

Selling a property bought through an SMSF isn’t that different compared to a standard property sale. The difference lies in where the sale of the property goes and how it goes back into your super fund. Here’s a quick overview of the process:

1. Put your SMSF property on the market. Look at similar homes sold in your area to figure out a fair market price. Getting the price right is essential. Price it too low and you risk leaving money on the table; price it too high and you could alienate buyers. A real estate agent could help you ensure your property is priced fairly.
2. Make quick repairs and improvements. Doing so can increase the value of your property. Although this isn’t a requirement, making simple repairs and upgrades could make your property more attractive to buyers.
3. Have the contract of sale drawn up. A real estate agent, solicitor, or conveyancer will prepare the contract of sale. Since selling an SMSF is a bit different than a standard home sale, having a property lawyer oversee the contract may be a good idea.
4. Negotiate with the buyers. Talk to buyers about the final price and terms. Your real estate agent can deal with the back-and-forth discussion about price, stipulations, and initial payments.
5. Contact the lender to discharge the SMSF mortgage. Get in touch with your lender immediately. Before finalising the settlement, talk to your lender about discharging the mortgage on your SMSF property. This could be a lengthy process so it’s best to prioritise this step.
6. Finalise the settlement. During the settlement, all the paperwork and documents are signed. The property is exchanged from the seller to the buyer. Whoever manages the SMSF property will hand over the title. The proceeds from the sale will go to any fees incurred during the sale and the rest to the super fund.

Even though selling an SMSF property follows a similar process to a standard property sale, hiring experts is still a good idea. Real estate professionals can guide you through the SMSF property sale so you can avoid common pitfalls.

Costs and taxes involved when selling SMSF property

When selling an SMSF property, you may incur legal fees and disbursements related to the conveyancing process. Legal fees vary depending on the solicitor and transaction but typically cost between $500 to $1,500. Meanwhile, disbursement costs could cost anywhere from $200 to $500. This includes title searches, transfer fees, lender fees, and the like.

Income or investment returns of an SMSF are taxed at a 15% concessional rate. The profit from your SMSF property sale or capital gains is considered regular income. With SMSF, income or investment returns are taxed at a 15% concessional rate. You must include capital gains and capital losses on the SMSF annual return to the ATO (Australian Tax Office).

Your SMSF property could be eligible for a tax discount if it’s been held for over 12 months before it was sold. You may also be eligible for zero capital gains tax if the fund is considered an income stream. However, you need to ensure the SMSF property meets the requirements. Get an SMSF accountant to help you manage your super fund and ensure you’re on the right path.

Can I sell my investment property to my SMSF?

In specific cases, it is possible to sell your investment property to your SMSF. You can only sell your investment property to your SMSF if it’s considered a business real property. This is a type of property exclusively and wholly used for business. Think commercial properties, office buildings, or factories.

Business real properties do not include residential investment properties. You can’t simply rent out your investment property and call it a business to qualify. For your investment property to be considered business real property, it must meet certain qualifications.

An SMSF is typically not allowed to buy from members, trustees, or beneficiaries of the fund. People related to the superannuation fund members (also called related parties) are also not allowed to buy the SMSF property. This includes family, close friends, business partners or other entities connected to any of the members and trustees of the SMSF.

Before selling your investment property to your SMSF, weigh the pros and cons carefully. If done incorrectly, you could face serious consequences. The wisest thing to do is ask for advice from an SMSF expert so they can guide you through the process.

Can I sell my SMSF property to myself?

If it meets specific conditions, you could sell an SMSF property to yourself. However, there are strict guidelines you need to meet for the sale to be possible.

When selling an SMSF property to yourself, you need to make sure the transaction is at arm’s length. The sale should involve two unrelated parties and an independent valuation must be conducted on the property. It would be best to consult with a professional before taking any further action.

Find low-rate SMSF loans at loans.com.au

If you’re interested in buying a property using your SMSF, loans.com.au offers a range of SMSF residential and SMSF commercial loans. Get in touch with us today to learn more about your finance options. Call 13 10 90 today to speak with our friendly lending specialists!

Find out in under 2 minutes if you qualify for one of our low rate home loans.