Overseas Property

An SMSF can invest in properties overseas as neither the SIS Act or the ATO prohibit these types of investments. This type of investment is not too different to investing in Australian property.

The SMSF must have legal title over the overseas property. Some countries will not allow the SMSF to hold the title of the property. Hence a structure looks like the below graph will need to be set up before the Fund invests in the overseas property:

The above structure is also required if there is borrowing involved in purchasing the property.

Note: The SMSF owns 100% of a Bare Trust \ Custodian Trust. The SMSF has 100% ownership of an overseas investment property and an overseas bank account

There are a number of options and requirements that the fund will have to address before investing in an overseas property.

  • The fund will need to ensure the Investment Strategy and the Trust Deed allows the SMSF to invest in an overseas property.
  • An SMSF although not unique to Australia may not be recognised in the country you are investing in. If you need we can establish a suitable structure that will meet the legislative requirements both abroad and in Australia.
  • The overseas property will need to be in the name of the SMSF or a Bare/Custodian Trust that the fund has control over, there are some exceptions detailed in the next point where foreign investors are restricted to buy property.
  • In some Asian and sub-continent countries foreign overseas investors are not allowed to own property. The fund will need to find a resident (preferably a member of the SMSF) in the country who can represent the fund and title of the property can be accommodated in the structure.
  • The SMSF needs to make sure that the property has not been used as security for a loan or mortgage.
  • The laws and customs are different in all countries and the implications specific to that country will need to be adhered to.
  • The entity you have established will have to be registered to pay taxes in the overseas country. An accountant in that country will be able to provide the appropriate assistance. We will be able to help you with the tax obligations locally.
  • To avoid paying double taxes here is a list of countries that the ATO has a reciprocal tax treaty with.
  • If you are planning to borrow funds to make the overseas property investment the fund must confirm that the SMSF loan includes limited recourse includes the correct limited recourse clauses.
  • The LRBA terms and conditions must be consistent with good arm’s length practices.
  • The SMSF or Bare/Custodian Trust will need to have an overseas bank account to receive rent payments, and pay for maintenance and other related expenses. The financial institution will need to meet the definition of a Deposit Taking Institution as stipulated in the Banking Act 1959.
  • Where the language spoken in the investing country is not English we recommend that a translation is obtained of all documents, contracts and agreements.

To see how you can invest in USA Property, please see here.

 

  • vivek

    Hi
    I already have my SMSF setup (corporate trustee). I now need to purchase a overseas property (INDIA) and wanted to know if you can help me out with the required missing documents that I need (Bare Trust – individual trustee, minutes of meeting, update SMSF deed if required to reflect the investment). thanks
    vivek

    • superannuationwarehouse

      Vivek,

      To issue these documents, we would usually be the administrator so we can view the current details of the Fund. We then use a lawyer to issue these documents. The procedure for us to take on your Fund is explained here:

      http://www.smsfwarehouse.com.au/smsf-setup/existing-smsf-take-on/

      More details on the process involved with overseas properties are explained here:

      http://www.smsfwarehouse.com.au/smsf-investments/property/overseas-property/

      Happy to discuss if not clear.

      • vivek

        Hi
        I would like to have a chat with you to provide my situation and than decide next steps i.e. Whether to move my fund administration or not.
        appreciate if you can call me back, I have left a message for your on the number provided on the website.

        vivek

        • superannuationwarehouse

          Vivek,

          As discussed on the phone, please send me your SMSF name, the Members’ names and the name of the Corporate Trustee. We use a lawyer to draw up the bare trust and there will be a second bare trust to hold the bank account. We will charge your Fund $950. Can you also send us the details of the property to be noted in the bare trust as explained here: http://www.smsfwarehouse.com.au/smsf-investments/

          Trust this is clear.

          Regards Hein Preller Director – Superannuation Warehouse 03 95894256 (Office) 04 11241215 (Mobile) smsfwarehouse.com.au

    • superannuationwarehouse

      Vivek,

      As discussed on the phone, please send me your SMSF name, the Members’ names and the name of the Corporate Trustee.
      We
      use a lawyer to draw up the bare trust and there will be a second bare
      trust to hold the bank account. We will charge your Fund $950. Can you
      also send us the details of the property to be noted in the bare trust
      as explained here:
      http://www.smsfwarehouse.com.au/smsf-investments/

      Trust this is clear.

      Regards Hein Preller
      Director – Superannuation Warehouse 03 95894256 (Office) 04 11241215 (Mobile)
      smsfwarehouse.com.au

  • vikas sood

    I know this is an old thread but I am really interested to find out what the rules are?So you can buy property in India through an SMSF with the correct structure in place. Can SMSF (Bare trust) hold a title of a piece of real estate in India? There must be rules on what kind of property you can or cannot buy.

    • Hein Preller

      Vikas,
      An SMSF can purchase property overseas on the basis it it has a legal enforceable right on the title.
      Therefore, if the SMSF’s name appears on title, a bare trust may not be required if there’s no loan. But overseas countries will usually not note the SMSF as the legal owner. Therefore we do a bare trust to note if its in your name, you hold it for the benefit of the SMSF.
      Trust this answers your question.

  • Dan

    G’day,
    I’m looking to start a SMSF I have approx. 200,000 in shares/cash incl. my wife’s super (about 30k).

    I want to purchase property in the United Kingdom while the exchange rate is falling (targeting for the next 12 months if the rate is favourable)

    Is it possible to set up a SMSF for purchasing property in the UK borrowing at 80% with no LMI?
    Anymore information around this would be much appreciated

    Dan

    • superannuationwarehouse

      Dan,

      On the basis the Trust Deed and Investment Strategy allows for this type of investment, there’s no reason from a technical point of view why you can’t proceed with this transaction. The standard Investment Strategy and Deeds we issue allows for this type of investment.

      From a practical point of view, an overseas bank will generally not lend to an SMSF. The SMSF must have sufficient funds to purchase the overseas property outright. Same for banks in Australia, they will generally not grant a loan for an overseas asset.

      A possible way might be to do a related party loan to the SMSF. See our page on this topic:
      http://www.smsfwarehouse.com.au/smsf-investments/property/smsf-loans/related-party-loans/

      Lastly, also be mindful the SMSF must have legal ownership over the overseas assets it owns. This means the UK property must be registered in the name of the SMSF or alternatively set up a bare trust arrangement noting the legal ownership of the asset to the SMSF.

  • Gaz Khawaja

    Hi,

    I’m looking to start a SMSF and primary country of investment will be Pakistan. So please tell me what kind of trust i would need to set up and associated costs.
    I wont be borrowing.

    Thanks Gaz

    • superannuationwarehouse

      Gaz,

      To start an SMSF, which is a type of a trust structure, cost $150 or $1,100 using a corporate trustee. This is the first step you will need in order to use super for investments.
      When investing overseas, its important the SMSF holds legal title over the assets it owns. Usually overseas countries do not recognise an SMSF and this would require a bare trust to be set up, as explained above. We charge $950 to set up a bare trust. More on the fees we charge on this page:
      http://www.smsfwarehouse.com.au/smsf-setup/costs/
      Trust this gives you the guidance needed.

      • Mohsin Aziz

        Hi,
        I am also thinking about purchansing an investment property in Pakistan using my Super. I won’t be borrowing either. Could you please explain why bare trust is needed.
        Thanks,
        Mohsin

        • superannuationwarehouse

          Mohsin,

          The
          SMSF must have a legal enforceable right to the asset it owns. The property can’t
          be in a person’s name if the SMSF actually owns it.

          If the overseas property was registered in the name of the SMSF, all good.
          However with overseas countries they usually do not register the property in
          the name of the SMSF. This might be because they dont know what an SMSF is or
          don’t want to register it in the name of an SMSF trust structure. For this
          reason, if it’s registered in your name, you need a document noting you hold it
          on behalf of the SMSF. This document is called a Bare Trust.

          So the objective is for the Bare Trust to note the individual as the holder of
          the overseas property on behalf of the SMSF.

          We use legal documents to set this up and the cost if we do it is $950.

          Thanks

          • Mohsin Aziz

            Thanks,
            Just another quick one. To setup an overseas back account (in my name) would I need another bare trust? I am sure the overseas banks won’t allow me to open up an account in Super funds name.
            Mohsin

          • superannuationwarehouse

            Mohsin,
            The SMSF must have legal title over all assets it owns. Its important you keep personal assets separate from the SMSF.
            If the bank account is in your name, it needs to be in your capacity as Trustee. We then set up a Declaration of Custody Trust to reflect the arrangement that you hold this bank account for the SMSF.

        • Mohsin Aziz

          Thanks for your response. Can please give me a call on 0430033995. I want to discuss my circumstances.

          Mohsin

  • Zeeshan Qureshi

    Hi

    Is it possible for 2 different SMSF to chip in and buy a
    property overseas?

    • superannuationwarehouse

      Zeeshan,
      Two SMSF’s can purchase together, and this is called tennants in common.
      Make sure the SMSF has a legal title to the asset it owns. So there needs to be a legal enforceable right for the SMSF to this asset. Either the SMSF must be noted on title, or alternatively, set up a Bare Trust noting a Trustee hold the property on behalf of the Fund. The first option would not cost anything to set up (apart from the normal stamp duties etc.) and to set up a Bare Trust will cost $950 if we set it up.
      Trust this answers your question.

  • Matt

    Hi, If I set up a SMSF with the structure described above. Am I capable of buying a property offshore (i.e NZ). Secondly, the rental income is obviously part of the investment income,
    would that include Airbnb rental income? I personally don’t see it as carrying
    on a business, more so maximising the yield.

    What are the costs involved in your setting this structure
    up. Assuming that would mean an Austrailan Structure and some sort of New
    Zealand based structure as well?
    Thanks

Contact Details


logo-grey

Peace Of Mind

We are Melbourne based with clients throughout Australia. Our SMSF administration service is mostly paperless. This enable us to charge a fair fee, resulting in a good value-proposition for you.

No Advice

Superannuation Warehouse is an accounting firm and do not provide financial advice. All information provided has been prepared without taking into account any of the Trustees’ objectives, financial situation or needs. Because of that, Trustees are advised to consider their own circumstances before engaging our services.

SMSF Topics