New tax rulings could cause a dump of great commercial properties on the market

Giving you info on tax rulings and the like is not my bag, as you would know if you have read my blogs for a while.

How you deal with your tax implications is up to you. We all have to make our choices.

However, this news is a slightly different kettle of fish.

New tax rulings have come into place which is going to negatively affect all the people who already own commercial property in their self-managed super funds.

It goes something like this:

“Self-managed super funds are getting the jump on new tax laws due to be introduced next year by selling off commercial properties to avoid being stung with hefty tax bills.

CBRE agents say more than a quarter of the properties they have listed for sale in Melbourne in November and December are owned by super funds, some of which hurrying to offload their commercial assets before changes come into effect on July 1.

Among the new super laws given the green light this week, funds with balances over $1.6 million will be taxed 15% on every dollar over that amount, as well as being slapped with a capital gains tax of up to 15% when they sell their property.

Managed Super funds have been quick to react, more than seven months ahead of the changes coming into effect.

Among the sales putting the trend in the spotlight, a South Melbourne building leased to ANZ and owned by a superannuation fund sold for $5.7 million at auction.

We have started to list properties under these circumstances for the start of 2017, and anticipate seeing further stock coming onto the market all the way through to June, should the new regulation be passed

“Some 28% of properties we have listed in November and December are owned by superannuation funds, with some these owners receiving advice that there could be significant tax implications should they continue to hold these assets in their super post-June 30 next year,” he says.”

So there is it. If you own commercial property in your super fund – you have been warned…

Its best to get proper advice from your accountant of financial advisor on anything to do with your super fund and certainly not good to panic sell , if its positive cash flow and you have to pay some tax its not the end of the world…

…but more importantly…

If you don’t own any commercial, but you like passive income… then you need to get your head around how it works now because there could be some great opportunities coming up in the next few months.

With super funds dumping properties on the market before the end of the tax year

there may well be a glut of good properties that have been tightly held for a long period of time and a fantastic opportunity to pick up a property that would look fantastic on your portfolio income sheet.

Some of these vendors will just want to get rid of the properties as fast as they can, others, no doubt will think they can take advantage of the increased interest in commercial and think they can get an excellent price.

I don’t reckon they will. In the words of Darryl Kerrigan from “The Castle”: He’s Dreamin’!

The chances are that, with time running short, there will be lots of scope for negotiation.

Of course, all the usual rules apply for choosing the right property and doing due diligence, that never changes.

But I’m predicting that we will see some great properties come onto the market. If you’ve been looking at the commercial market for some time, you’ll have probably seen that that is already happening.

Of course the big managed super funds will be getting rid of big properties, but there are plenty of Ma and Pa investors with self managed super funds who will be re-thinking commercial ownership.

Something to look out for. Hope it helps.