Investing in commercial premises through an SMSF

Figuring out whether buying your commercial premises through your self-managed super fund (SMSF) is an option that’s suitable for you is imperative to the success of your investment.

There can be many gains in purchasing commercial property through your SMSF, including creating a certain level of freedom by smart use of resources.

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.

Then there are the tax benefits.

While it is in the accumulation phase, income tax is only $0.15 in the dollar. In retirement, as the law stands, it’s zero. This means that the money accumulated in an SMSF through the investment does not get taxed.

On the flip side of the shiny self-management coin, the SMSF specialist offers a word of warning regarding obligation. There is an absolute element of responsibility in compliance matters. 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 earnings elsewhere.

Having a SMSF means you can’t give all of this work to someone else to do for you, but you can seek advice. Many MFAA accredited finance brokers have completed specialist SMSF lending and commercial property finance training, giving them the expertise to form an integral part of your team.

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