One of the most important decisions a business owner will make is about their commercial premises.
Whether to rent or buy, where to base the business and even the style of the property are important things to get right. For those with a self-managed super fund (SMSF), there is one more option to consider….
“Do you make your business premises a long-term investment property at the same time?”
Figuring out whether buying your commercial premises in your SMSF is an option that’s suitable for you is imperative to the success of your investment. There can be many gains through purchasing commercial property through your SMSF, including creating a certain level of freedom by smart use of resources. David Hasib from Chan & Naylor Wealth Planning says….
“It frees up capital for the business owner. They are unlocking super to do more for them”
Further to this, the property is protected against insolvency. Depending on the type of business, this can be particularly appealing. “There’s a tremendous level of protection of assets within super, so it ticks the asset protection box for a lot of SMEs that may be subject to litigation due to the nature of what they do,” Hasib says.
Then there are the tax benefits. “While it is in accumulation phase, income tax is only $0.15 in the dollar. In retirement, as the law stands, its zero,” Hasib says. This means that the money accumulated in an SMSF through the investment does not get taxed.
On the flip side, Hasib offers a word of warning regarding your obligations under SMSF….
“You are the trustee of an SMSF and you need to understand what those responsibilities entail”
You must pay commercial rates for rent through a prearranged lease agreement and, although having a protected asset is great for some businesses, it also means that equity is locked within the fund. You can’t take the earnings and use it elsewhere.
It’s important to have a team of advisors around you.
At Craig Tracey Lending we can give you all the information you need to borrow inside your SMSF. Firstly, you should speak to your Accountant or Financial Planner for advice on whether an SMSF is right for you.
Click here for more details on SMSF borrowing: Business Finance