Many small business owners rent their premises and pay rent to a landlord.
However, since 1998 self-managed superannuation funds (SMSF) have been permitted to invest in business real property, and since 2008, they’ve been able to borrow money to do so.
Many small business owners don’t like paying rent, and if they could, would much prefer to buy their business premises and pay it off.
Assets they may have built up in their superannuation accounts can now be used to help fund the purchase of their business property. However, this would need to be structured through a self-managed superannuation fund.
And if you need to borrow funds to purchase the property in your SMSF, the 9.5% compulsory super you pay yourself as an employee together with the rent your business pays your SMSF can help pay it off.
At retirement you’ll have additional options. For example, you could sell your business but your SMSF could retain the business premises, continuing to collect rent from the new business owner. The rent could be tax free provided you’re over age 60.
Alternatively, if you retire after the age of 60 your SMSF could sell the business property free of capital gains tax.
While the strategy holds lots of appeal, there are many issues to consider, particularly in terms of ensuring that the arrangement makes sense and is properly structured. It’s definitely something worth seeking professional advice on.
If you are a small business owner or know someone who is currently renting their business space, contact us today toll free on 1800 679 000 for our Rockhampton office and 1800 804 431 for our Melbourne office. We would be delighted to speak with you about self-managed super funds.
The information provided in this article is general advice only. It is prepared without taking into account your objectives, financial situation or needs. Before acting on the advice in this article, please consider the appropriateness of the advice, whether the advice is appropriate to you, your objectives, financial situation and/or needs, before following this advice.