Property and ARF

[hypedup]

I'm wondering about how a rental property investment works as part of an ARF? Understand there are tax benefits but have seen references to 'arms length'. Does this mean purchase needs to be channeled through a fund manager?

This is my first post here, I searched through the forum but couldn't see anything directly relating

Any info appreciated.

Frankie.

 

[Conan]

Any assets held in an ARF (including a rental property) operates on a “gross roll-up basis, so no tax is paid within the fund. Tax is paid on income drawn down from the fund - minimum 4%pa. The issues with holding a rental property as an asset are:
- the property must be bought, rented and sold at arms length. So you cannot buy a property you already own personal. You cannot rent it to a connected party such as a son or daughter. When the ARF sells the property it also must be sold at arms length.
- the ARF must be managed by an independent manager who will also be responsible for managing the property. So any rental income will need to cover all the associated costs such as insurance, maintenance, repairs etc.
- depending on the net rental income (after allowing for costs), the ARF will need to retain sufficient liquidity to pay out the minimum of 4% drawdown each year

If you are proposing to invest some ARF assets into a rental property you will need independent and specialist advice.

 

[hypedup]

Many thanks Conan, this is very helpful and fully answers my question. I'm wondering at this stage if there's any published guide to ARF's for the uninitiated?