SMSF an option when buying a home for your business
Small business owners keen to make the most of the property market are using their self managed super fund to buy a home for their enterprise.
Experts say benefits include more money going into your superannuation fund and being able to pay rent to yourself, instead of someone else.
But they also warn of potential pitfalls, including capital gains tax and stamp duty, and urge business owners to seek good advice about the issue.
According to the Australian Securities and Investments Commission’s MoneySmart website, “your SMSF could potentially purchase your business premises, allowing you to pay rent directly to your SMSF at the market rate”.
Raine and Horne Commercial Brisbane North Director Trent Bruce says low interest rates and the prospect of 8% yields make buying commercial properties appealing.
“You are borrowing at 5.5% to 6% on commercial rates … you are positively geared from day one,” he says.
SMSF Survival Centre founder Max Newnham says buying or transferring a business property to an SMSF can be a viable option.
“If a small business owner is looking at doing this it is vital to get good advice,” he says.
Newnham says that if a super fund has enough funds, and the members have high debt levels, a super fund can buy business real estate from its members.
“The aim of this strategy is to reduce the debt payments of the members, use the increased cash flow to increase super contributions to the fund, and provide the super fund with a direct property investment that produces a commercial rate of return.”
Newnham says costs include stamp duty paid on the selling value of the property and the purchase costs.
“The underlying principle of this strategy must be commerciality,” Newnham says on his website.
“In addition to a market value being paid for the property, the rent paid by the business must also be at a commercial rate and paid regularly and on time, just as would be the case if the property was rented from an independent third party.”