Hello

I am looking for some information about setting up a SMSF and using it to buy an investment property in the UK.

We are are temporary residents (457) and will be returning to the UK in the next 12-18 months.

Anyone had any experience with this - or could point me in the right direction for information?


Thank you

I work in the SMSF department of the accounting firm I work for.

I'd like to know why you want to go to the expense to set up an SMSF when you don't have any plans to retire in australia?

Selecting an appropriate trustee would be tricky. If you name yourself as trustee, then the minute you leave Australia, your fund becomes Non-complying and is taxed at the highest rate.

You would also find it VERY difficult to do a geared investment in an SMSF where the property is outside Australia. The property is "owned" by a bare trust until the mortgage is paid in full, at which time the title passes to the SF trust.

I'm seeing LOTS of legal bills and expense, and very little, if any return.

What is it you're trying to accomplish?



cheers,
Marilyn

Hi Marilyn,

I got a client who is got a SMSF and wants to purchase a proprty in the UK, have you dealt with somthing like that befor?

Thanks

Regards

Philip

None of our clients have international investments mainly because of the burdensome legal requirements. International bare trust financing is extremely difficult to make work with Australian law and it will take a VERY experienced lawyer specializing in SMSF trust law and UK trust law to make it work.

Then there are issues of non-compliance if the client leaves the country, the sole-purpose test for the asset purchased.

Unless the SMSF can afford to buy the property out right and is dedicated to renting to a non-associate, I wouldn't recommend international real estate for SMSF. The annual audit will be an issue too, our auditors usually go and inspect the property as part of the audit. Will your client be willing to give an auditor an all expense paid holiday to the UK every year?


just my opinion on this matter

Marilyn

What about if the client borrow the money himself under his name and lend it to the super fund, It looks like that will be the only way.
are you saying that the auditor must go and inspect the property himslef? I am sure he doesn't or at least hope not

The financing arrangement you propose will not be allowed under the related party rules, and an SMSF is not allowed to borrow money in its own name, hence the necessity for the bare trust to be the borrower of record.

As for the audit, it depends on what auditor you use, we have several on contract and they prefer to inspect the properties held in SMSFs. With the new accountability rules on auditors coming into force this year, I think that SMSF auditors will be VERY cautious and will take extra steps to avoid any issues down the line.

You really need to consult with a specialist SMSF accountant and trust lawyer. I don't see any way that this can be done without MASSIVE amounts of complications.


Cheers,
Marilyn

Thanks Marilyn really appricate your advise