Moving your business premises into your superfund

Moving your business premises into your superfund

Moving your business premise or buying a business premise with your SMSF can provide some real benefits. However, there are a number of rules that need to be met. Lets look at some of the benefits first.

Rental Income for the SMSF

Rather than paying rent to a landlord, your business pays rent to your SMSF. This will create a predictable and stable source of rental income for your SMSF.

Stability

A number of businesses we talk to want stability in their business. This is one way to improve control and therefore stability by removing the relationship with a landlord.

Tax benefits

One of main reasons for undertaking this transaction is tax advantages. Because you are moving your asset, the business premise, into your SMSF tax on the income and any capital gains will generally be less than outside the SMSF.

This is because SMSF earnings are taxed at 15% compared to a business paying tax at 30% if they are a company.

Your business may claim a full tax deduction for lease payments and your SMSF will pay tax on this at concessional rates of 15% or potentially 0% if you are in the pension phase.

Lease payments don’t impact contribution limits

The lease payments you make are contributions to your SMSF and they aren’t included in your contribution cap for the year for the simple reason being they are classified as ‘investment earnings’.

Improved capital position

When you use your SMSF to buy your commercial premises there will usually be an injection of funds into the business, which can be used to improve your capital position.

Stamp duty exemptions or concessions

Many states within Australia provide stamp duty concessions when you transfer your commercial property into your SMSF. These can vary from state to state so it is best to seek advice first.

Your assets are less accessible to creditors

When you hold assets within your SMSF, depending on the circumstances, they may be less accessible to creditors.

There are however a number of conditions that need to be met. Here are a few of the key ones.

Must be business real property

This is one area that generates a lot of questions and discussions. The property must be ‘business real property’. That is it must be commercial property such as an office or shop. It must also be bought at fair market value. Which means you will need an independent valuation.

Capital Gains Tax (CGT)

With this transaction there will likely be a CGT imposed. It is important to remember that the business owner may be eligible for the small business CGT concession, which can reduce or even remove the CGT.

Borrowing with your SMSF to buy the business premises

If you are looking to buy the business premises within your SMSF and your fund does not have enough cash you can borrow within your SMSF under a ‘limited recourse borrowing arrangement’.

Talk to experts and get the right help

We would always suggest you talk with your financial planner, solicitor and accountant before undertaking a transfer like this. It is important to ensure that the transactions and arrangements are structured correctly.

If you have any questions or would like more information please contact me rose@rbgprivate.com

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