Property Joint Ventures

A super fund is permitted to buy real estate in partnership with others (including members). However, conditions apply.

  1. The jointly owned property cannot be used as security for borrowing by anyone, including the parties to the joint venture.
  2. All contributions to the purchase price must be split between the parties in the same proportions as their ownership.
  3. All income and expenses must be split between the parties in the same proportions as their ownership and at the time each amount of income is received or expense paid.
  4. It is strongly recommended that a specific joint venture bank account be established.
  5. If GST applies to the property purchase or to rent, the joint venture is registered and lodges Business Activity Statements.

While such joint ventures are allowed under the legislation, the fund auditor and the Tax Office will be alert to some of the problems that commonly arise. These include:

  • Failure to properly share the purchase price, including legal fees & stamp duty. For example, in a 50/50 joint venture, one party might pay the deposit, the other party might pay the stamp duty and legal fees with a settling up when the property formally settles. This is not correct. All payments should be split 50/50.
  • Failure to correctly split income. For example, in a 50/50 joint venture, the two parties might take turns to bank the monthly rent. This is not correct in principle and of course the monthly rent may vary, especially if it is a residential property managed through an agent.
  • Failure to correctly share expenses. For example, in a 50/50 joint venture, the two parties might take turns to pay the routine expenses like rates. This is not correct in principle and of course the rates may vary from time to time.
  • Allowing the non-super party to mortgage the property. This is specifically prohibited under the SIS legislation.
  • Allowing a member or their family to rent the jointly owned property. If it is residential property, this is a breach of the in-house asset rule.

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