Selling Your Business Premises To Your SMSF

Are you part of a Self Managed Super Fund (SMSF)?

Most SMSF members know that there are strict rules about acquiring assets from a related party.

These apply to the sale of a residential property from a member to a SMSF.

However, these don’t apply to the sale of a business premises. Read on to find out how you can sell property to your SMSF.

Cheap loans available!

Looking to finance the purchase of a business property from a related party to your SMSF?

There is a big difference between the pricing on SMSF commercial loans from different lenders. However, we can almost certainly beat the bank on price!

We know which lenders take a flexible approach to lending and will look at your finances in a favourable light. This will allow you to borrow a significant portion of the property value.

Buying a business site

Most SMSFs want to buy their own business site, however many members get confused about the related party rules.

The good news is that a business premises can be purchased by a party related to the SMSF.

This is because the property is classified as ‘business real property’.

The Australian Taxation Office (ATO) views this differently to residential property. For this reason, a SMSF is able to own a business premise and conduct business activity through it.

The SMSF is then entitled to purchase the property from a related party at market rates. However, the entire transaction must be at arm’s-length.

What is business real property?

This type of property is defined as one that is used exclusively for business, irrespective of who is actually operating the business.

If the property meets that definition, you can sell or transfer it into your super fund.

What taxes apply?

You may be required to pay Capital Gains Tax (CGT) and stamp duty when rolling your business property into your SMSF.

Although, some exemptions apply. Therefore it is best to speak to a SMSF expert who can advise you of any tax benefits you are eligible to receive.

Can I sell a residential property to my SMSF?

Unfortunately there are strict prohibitions on doing this.

A SMSF is generally only allowed to own property that is leased to tenants who are not related to the SMSF.

What is a related party?

A related party includes any members of the SMSF, their relatives, as well as your business.

However, ‘business real property’ is not included. This means that you can engage in arms-length transactions for the sale of a business premises to your SMSF.

Rate of rent payable to SMSF

If your SMSF owns the business property it is required to pay a commercial rate of rent to the fund.

However, this rent will be tax deductible and will not be classed as a contribution to your Self Managed Super Fund (SMSF).

Because a commercial rate of rent is payable, you must ensure that your business can actually afford to make these repayments.

Assess the cash flow of your business before you sell it to your SMSF and are obliged to pay the set commercial rate.

For help managing your SMSF investments please enquire online today to get specialist advice for your situation.

How can I use the business property?

As a general rule, the property cannot be personally used by you and must be used to operate the business.

This means that if it is an office or a warehouse, it must be used to further the purposes of the business and cannot be used for any personal purpose or gain.

What if the business becomes bankrupt?

Whilst financial instability and the prospect of bankruptcy may seem alarming, a limited recourse borrowing arrangement applies to all SMSF loans.

As a result of this arrangement, your personal assets will be protected.

Want to know more? Speak to us!

Self Managed Super Funds (SMSF) can be great investment vehicles, saving you tax and helping you fund the purchase of a business premises.

For more information on how you can sell your business site to your SMSF, please contact us or enquire online.

Our specialist mortgage brokers know which lenders have the most competitive loan packages and cheapest rates. We can help you get approval!

Note: this website is for informational purposes only and should not be substituted for professional financial or taxation advice.