I am 50 and have two serviced apartments as investment properties.  The properties are worth a total of $730,000; the mortgage on each is $150,000; and they both have long-term lease agreements with guaranteed rental income.  Current gross yield, based on purchase price, is around 6 per cnet a year, and they are almost positively geared.

I also have $500,000 in an SMSF, invested in managed funds and shares. There is no property held under SMSF.

Can I sell or transfer one of the properties at market rate into my SMSF?  I understand this will incur about 7 per cent in transaction costs and CGT, if applicable.  Do you think it’s a better investment inside or outside the SMSF?

ANSWER:

Section 66 of the SISA prohibits a trustee from intentionally acquiring certain assets from a related party.  There are exemptions such as listed securities, and business real property.

It would seem that neither of these applies in this instance.  You would almost certainly have capital gains tax to pay if you did transfer them (which you can’t) and in any event, I think they’re better held in your own name.