As Self Managed Super Funds (SMSFs) continue to grow in popularity, an increased investment choice inside an SMSF is to buy property. Options are available to buy all types of property – residential, commercial, industrial, rural etc.

Generally, a very effective strategy is for a small or medium business owner to purchased their commercial premises through their SMSF. This can be facilitated in a number of ways including:

  • Buying a commercial property outright with their superannuation money,calculator-financial-planning-superannuation
  • Using superannuation money as the deposit and borrowing the remainder of the money required to purchase the commercial property,
  • Transferring an existing commercial premise inside the SMSF as a non-concessional contribution (within limits),
  • Having the SMSF buy the commercial property already owned by the business or individual.

While their can be risks involved if the purchase is not structured correctly, the benefits of this strategy can be quite attractive:

  1. With the current legislation you can only deposit $25,000 pre-tax per year into superannuation. By having the SMSF own the commercial property the business pays the SMSF rent which therefore increases the amount that is contributed to super to save for retirement.
  2. As trustees of the SMSF you would create the lease terms and not have your business subject to an external risk.
  3. If the property is positively geared, rent is only taxed at 15% in accumulation phase. When converting the SMSF to pension phase all rent would be tax-free.
  4. The effective rate of capital gains tax inside an SMSF is 10% while in accumulation phase. If you held off selling the commercial property until you were in pension phase, all capital gains would be tax-free.

As briefly illustrated above the tax benefits of holding your commercial premises inside an SMSF can be huge. In addition, you would have greater control and flexibility over your business premises.

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Thomas Jacks BCom (Acc), SMSF SpecialistTM, Adv. Dip F.S. (FP)
“I want to be able to assist clients with their investment and retirement planning by providing real strategy advice. It’s my aim to not only help my clients but to educate them by addressing the entire picture” Google Plus

Categories: Self Managed Superannuation, Superannuation   |  Posted on
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