How to Retire in a property you own in an SMSF
Living in a Self-Managed Super Fund (SMSF) property after retirement, may be achieved, subject to meeting specific conditions and following a set of steps to avail yourself of this opportunity.
Eligibility for Living in SMSF Property Post-Retirement: You can live in an SMSF property once you retire, but certain conditions must be met. Retirement typically means either reaching the age of 60 and leaving employment or retiring after reaching your preservation age with no intention of returning to work .
Process for Moving into SMSF Property: The SMSF property needs to be transferred from your SMSF to your personal name. This type of transfer is known as an ‘in-specie transfer’, which, must occur at market value. Super and tax laws require that you have access to your superannuation and meet a condition of release like retirement or cessation of employment after age 60.
Tax Implications and Other Considerations: When transferring the property from the SMSF to personal ownership, it’s important to be aware of potential tax consequences, such as Capital Gains Tax (CGT) and stamp duty. Additionally, there may be implications for Centrelink benefits if you intend on receiving the government age pension.
To transfer property from a Self-Managed Super Fund (SMSF) to a personal name via an in-specie transfer, follow these steps:
1. Verify Eligibility for In-Specie Transfer: Ensure that the SMSF’s trust deed allows for in-specie transfers and that the transfer complies with superannuation laws .
2. Execute a Contract of Sale: Prepare a Contract of Sale for transferring the property from the SMSF to the individual. This contract should reflect the property’s market value .
3. Engage a Solicitor: Involve a solicitor to ensure all legal aspects of the transfer are correctly handled, including the preparation and execution of necessary documents .
4. Consider Tax Implications: Assess any potential tax consequences, such as Capital Gains Tax, associated with the transfer.
5. Transfer Ownership: Finalise the transfer by registering the change of ownership with the relevant land titles registry in your state of residence.
John, aged 62, decides to retire from his job. He has an SMSF which owns a property that he wishes to move into. To do this, John undertakes an in-specie transfer of the property from his SMSF to his personal name. Note there maybe CGT costs and stamp duty costs to consider before undertaking this strategy, so consult with an adviser or tax lawyer first. The transfer is done at the property’s current market value. John consults with a financial adviser to understand the CGT implications and checks how this transfer might affect his Centrelink benefits. Once the transfer is completed in compliance with all legal and tax requirements, John can move into the property as his primary residence.
To conclude, residing in your SMSF property while adhering to the sole purpose test is achievable exclusively through an in-specie transfer. This method becomes viable upon reaching the age of 60, either when you start your retirement or, in some cases, upon terminating gainful employment. The in-specie transfer process effectively shifts the property from your SMSF to your personal ownership, allowing its use for personal purposes.