Doctors Nicole and Helen, both in their late 30’s, were running a successful specialist medical Practice partnership. They each had an SMSF with a large amount of money invested.
Nicole and Helen wanted to use an SMSF structure to buy land and build a new clinic. They didn’t have enough cash in their savings to
buy property, but when pooled together they had enough in their SMSFs.
In this situation, two unrelated SMSFs can invest in a unit trust that can borrow money to buy land and build property. When two SMSFs each own 50% of an asset, neither party has control over the asset which should allow compliance with the in-house asset rules. We set up the unit trust with the units owned by each of their SMSF’s. The SMSF’s purchased a decent number of units in the Unit Trust which resulted in the land being purchased outright. The unit trust then borrowed from the bank to undertake the development of the medical clinic.
Once the building was complete, the medical business paid rent to the Unit Trust at arm’s length rates.
Nicole and Helen were able to build and own a state-of-the-art Medical clinic through their two SMSFs.