Feedback from over 600 financial planning, accounting and legal firms across Australia has confirmed that SMSF trustees are completely overlooking what will happen to a so-called ‘lumpy’ asset such as a geared property if a fund member dies. One consequence could be the forced sale of the property – usually at a price well below its actual value; another could be trustees being lumped with a hefty capital gains tax and death benefits tax burden. An asset is considered ‘lumpy’ if it comprises a significant proportion of the total assets of the SMSF and is relatively illiquid. These assets typically include real estate and holdings in private companies.
DOWNLOAD ARTICLE Jackie Pearson, Wealth Management
In the rush to purchase property assets, SMSF trustees may not be considering how these ‘lumpy’ holdings will be sold after their death, according to an SMSF advice and training provider. The consequences of this oversight could be the fire-sale of the property, with the risk of it being sold well below its market value, or of beneficiaries being liable for hefty death benefits and capital gains liabilities, said national manager, training and advice, Topdocs, Michael Harkin. “According to the feedback we’re receiving from the industry, trustees purchasing real estate with borrowings are quick to calculate what their potential investment gains will be and how to manage loan repayments, but they give scant regard to what will happen to the asset should a fund member die,” said Harkin.
DOWNLOAD ARTICLE Ben Collins, The Financial Standard