Co-ownership is a beneficial and affordable way for self-managed super funds (SMSFs) to acquire real estate.
Superannuation law allows super fund members to co-invest within their super fund. The new Tenant in Common Exchange (ticX) provides an uncomplicated trading platform for co-owners. Until the development of ticX there was no trading platform for the sale and acquisition of tenants-in-common interests in real estate.
The law allows a SMSF member to own a property with their SMSF as tenants-in-common. However, as a co-owner the property must not be used as security for any borrowings the member may require. The member is allowed to use borrowings to acquire their share of the property. As long as the security is on another property that they own elsewhere.
A tenancy-in-common is created when a property (or part of the property) is sold and then owned by two or more persons in equal or unequal shares. Each co-owner’s share can be willed (bequeathed), sold or mortgaged separately. Each party is responsible for paying the property’s expenses proportionate to their ownership percentage.
Once acquired, the property must not be subject to a lease arrangement between the SMSF and the member, unless it is a business premises. This means, if a commercial property is bought by the member and their SMSF, it can be leased to the member to conduct business from it. However if the member and the SMSF buy a residential property, it cannot be leased to the member for private use.
What the Taxation Office says
The Taxation Office has stated in its publication SMSFR 2009/1, members must ensure they are buying an asset with their SMSF. They do so as tenants-in-common. Superannuation law requires ownership of assets by a SMSF to be clearly identified. In addition, the law does not allow members to use any of their SMSF assets as security for loans they may need to enter into privately.
ticX – a timely exit pathway
Should a person in a tenant-in-common co-ownership wish to sell their share it can be listed for sale on the ticX trading platform. The ticX trading platform is where buyers, investors and sellers transact any shared co-ownership registered on title.
Owners and buyers can login to the ticX online platform to view the listed property and other relevant information. Potential buyers are able to make a bid to purchase a co-ownership share or monitor bids.
Co-ownership gives more people the chance to buy property
We believe the ticX trading platform provides opportunities for many people to become property owners through co-ownership. The public benefit derived from this outcome will be significant. We believe that the ticX trading platform for shared ownership will open the door to more buyers.
The benefits of the ticX trading platform are far reaching. Most importantly the ticX trading platform provides a new and exciting approach to addressing property. Resulting in more affordability. A new pathway for the community to invest in real estate ownership. Furthermore the ticX trading platform also provides additional liquidity for tenants-in-common and co-ownership.
The ticX trading platform currently operates in Australia & New Zealand. Feel free to explore their website ticX.
If you are looking to invest in property, please don’t hesitate to contact us. We can help explore this new avenue with you!
*Disclaimer – We are a licensed real estate agency who specialise in sourcing brand new and off-the-plan properties for buyers. We are not qualified to provide advice in SMSFs, tenants-in-common or other financial matter. We highly recommend discussing this strategy with a financial planner, mortgage broker and lawyer in advance to making any financial decision of this nature. If you do not have a qualified professional, we can connect you to the right person.
Feb 2020
