Owning Your Business Property In A SMSF

Would you like to own your current business premises yourself?

Does the idea of buying your business premises sound attractive?

It certainly sounds a lot better than making your landlord rich!

Maybe there is the possibility that your superannuation money could help.

Over the years, one very popular strategy being used by many small business owners is to own their business premises in their own self managed superannuation fund (SMSF).

Why are so many people considering and implementing such a strategy: –

  •  You simply pay yourself rent (being your SMSF) rather than your current landlord.
  •  Asset protection is present in the event of severe financial difficulty or even bankruptcy. Creditors will find it a lot more difficult to get access to super fund investments.
  •  By having the premises owned by the fund rather than a third-party landlord you have more freedom to add fixtures and fittings, additional capacity and make changes to the layout without having to seek someone else’s approval before doing so.
  •  By accessing the money currently held in your superannuation fund, your business can utilise its own capital to build and maintain the business.
  •  Depending on your situation, you can purchase the property you need without the need to borrow much, if any money at all from the bank.

This strategy is a critical component in many small businesses out there and certainly goes a long way towards the accumulation of financial freedom in retirement.

Let’s use Bob as an example.

Running Accountant Bob and JaneBob is a builder and needs a property where he can store his supplies and equipment along with an office where his clients have access to him and his business.

A suitable property, maybe a factory, is available locally for $450,000. The problem is that the business doesn’t have the capital to purchase the property or the capacity to borrow the amount required.

Bob and his wife Jill currently have superannuation between them of $200,000.

What can Bob and Jill do?

Bob and Jill decide that the best thing would be to establish their own SMSF – this will give them total control and will result in less money having to be borrowed.

Their current balances of $200,000 will be rolled over to the brand new SMSF – no taxation implications will arise from such transfers.

Bob and Jill then make the decision that their SMSF should purchase the business property using a Limited Recourse Borrowing Arrangement to borrow the $300,000 plus costs and leave $50,000 liquid cash in the fund.

In this particular situation, the SMSF is a very tax effective investment vehicle for both Bob and Jill.

When Bob and Jane enter pension phase, the CGT and tax on any rental income can be minimised possibly to nil, making it a great long term wealth creation tool.

The advantages can be great, but the key here is to seek good tax advice to ensure you understand all the implications and requirements of purchasing or transferring a property into a SMSF.

Above all, talk with your accountant. We are here to help. Look us up at www.zjl.com.au

Happy Running…

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4 thoughts on “Owning Your Business Property In A SMSF

  1. Hi Peter, I run a small clothing store from a shop I own jointly with my Sister – am I able to do something like this? My Accountant I am using at the moment doesnt seem to be up with the latest rules etc??

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