The Federal Government has relaxed the rules in relation to Superannuation funds purchasing properties indirectly with the fund. Whilst they have relaxed the regulations they have also set down the rules as to how it should be done.

A Superannuation fund cannot purchase a property directly in its own name. The fund must purchase the property via, what the legislation calls a “Guardian”.

This Guardian can be a company or a bare trust, the bare trust is in fact a better option. The property is bought in the bare trusts name and the Super fund provides the funds to settle the property and also to meet the repayments if there is a shortfall from the rent that is received.

The Super fund can also be used to assist in the purchase of a property at arms length. This is done by the use of a special agreement between the super fund and a Discretionary Trust, whereby the Discretionary Trust complies with certain regulations and is held not to be a partner. This agreement then provides additional money to the Trust to enable them to settle the purchase price of the property. The super fund then receives a percentage return from the property on its investment.

When the property is sold, if there is Capital Gain, the Super fund shares in that Capital Gain.

We are well versed with both of these methods of acquiring property.

.