#9981

Hello Mark

Thanks for the question.

There could be the potential imposition of double stamp duty where an “or nominee” clause for the purchase of land is activated. This is a specialised area of law for which advice should be obtained from a legal practitioner.

Focusing on the SMSF specific aspects of the question, it is assumed that the contract will be settled by the trustee of the SMSF. Ordinarily, there would be correspondence between the vendor and the trustee of the SMSF advising that the “or nominee” clause is to be activated.

Ideally, the vendor should return the deposit to the individual, and then the SMSF, from its own bank account, should make the deposit to the vendor. It is appreciated from a risk management perspective, the vendor is unlikely to release the deposit it already holds until after the SMSF makes a fresh deposit.

At first glance, the above suggestion might seem cumbersome and you are entitled to question why this matter has been raised. The concerns here are twofold. If the deposit is made from funds that were not provided by the SMSF trustee, the risk of double stamp duty applying is escalated.

The second concern is that depending on the nature of the legal rights and obligations that were created when the land sale contract was signed and the deposit by the individual was made, it is possible that assigning over to the trustee of the SMSF the right to settle is not simply viewed as the making of a non-concessional cash contribution to the SMSF, but rather the acquisition of some type of asset other than cash from a related party by the SMSF, which could be precluded under section 66 of the SIS Act.

As the SMSF did not exist when the deposit was made, it is not possible to argue the individual was acting as an “agent” for the the trustee of the SMSF when the deposit was made.

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