SMSF
The Power of Your Super : Buying Commercial Property with an SMSF
Using your Self-Managed Super Fund (SMSF) to purchase commercial property for your business is a powerful and popular strategy.
Year :
2025
Mont Clair Capital
Using your Self Managed Super Fund (SMSF) to purchase commercial property for your business is a powerful and popular strategy. It's a key way to leverage your retirement savings, but it's a hot topic because it comes with strict rules that you must follow to remain compliant. This is often referred to as acquiring a business real property within your SMSF.
Business Real Property :
The most crucial rule is that the property must qualify as "business real property." This means it must be used wholly and exclusively in a business. The property can't be used for private or domestic purposes. A common example is an office, warehouse, or factory that your business pays rent to use. The property can be leased to your business, but the lease must be on commercial, arm's-length terms, meaning the rent is at fair market value.
Compliance and Loan Structure: When you take out a loan, it must be a non-recourse loan. This means the lender's claim in the event of default is limited only to the property itself, protecting your other superannuation assets. This strict requirement is why a limited number of lenders offer these types of loans.
The Benefits :
This strategy offers several significant advantages for both your business and your retirement savings.
Tax Advantages: The rental income paid from your business to your SMSF is taxed at the concessional superannuation tax rate of 15%. If you plan to sell the property after you retire and are in the pension phase, any capital gains can be tax-free, as long as you have met certain conditions.
Asset Protection: The property is held within the SMSF, separate from your personal assets. This provides a layer of protection from creditors in case your business faces financial difficulties.
Asset Diversification: It allows you to diversify your retirement savings beyond traditional stocks and bonds by investing in tangible property.
The Risks and Considerations :
While the benefits are significant, it's essential to be aware of the risks and compliance requirements.
The Sole Purpose Test: The property must satisfy the sole purpose test. The primary purpose of the property must be to provide retirement benefits to the members. If you were to live on the property or use it for any non-business purpose, you would be in breach of this rule.
Liquidity Risk: Property is an illiquid asset. If your business fails or you need to sell the property to fund retirement, it can take time. Your fund may be heavily reliant on a single tenant—your business—which creates a concentration risk.
Compliance Costs: There are significant ongoing costs, including annual audit fees, legal fees for the lease agreement, and property management expenses, all of which must be paid by the SMSF. You must also ensure the lease agreement is watertight and kept up to date.
More Projects
SMSF
The Power of Your Super : Buying Commercial Property with an SMSF
Using your Self-Managed Super Fund (SMSF) to purchase commercial property for your business is a powerful and popular strategy.
Year :
2025
Mont Clair Capital
Using your Self Managed Super Fund (SMSF) to purchase commercial property for your business is a powerful and popular strategy. It's a key way to leverage your retirement savings, but it's a hot topic because it comes with strict rules that you must follow to remain compliant. This is often referred to as acquiring a business real property within your SMSF.
Business Real Property :
The most crucial rule is that the property must qualify as "business real property." This means it must be used wholly and exclusively in a business. The property can't be used for private or domestic purposes. A common example is an office, warehouse, or factory that your business pays rent to use. The property can be leased to your business, but the lease must be on commercial, arm's-length terms, meaning the rent is at fair market value.
Compliance and Loan Structure: When you take out a loan, it must be a non-recourse loan. This means the lender's claim in the event of default is limited only to the property itself, protecting your other superannuation assets. This strict requirement is why a limited number of lenders offer these types of loans.
The Benefits :
This strategy offers several significant advantages for both your business and your retirement savings.
Tax Advantages: The rental income paid from your business to your SMSF is taxed at the concessional superannuation tax rate of 15%. If you plan to sell the property after you retire and are in the pension phase, any capital gains can be tax-free, as long as you have met certain conditions.
Asset Protection: The property is held within the SMSF, separate from your personal assets. This provides a layer of protection from creditors in case your business faces financial difficulties.
Asset Diversification: It allows you to diversify your retirement savings beyond traditional stocks and bonds by investing in tangible property.
The Risks and Considerations :
While the benefits are significant, it's essential to be aware of the risks and compliance requirements.
The Sole Purpose Test: The property must satisfy the sole purpose test. The primary purpose of the property must be to provide retirement benefits to the members. If you were to live on the property or use it for any non-business purpose, you would be in breach of this rule.
Liquidity Risk: Property is an illiquid asset. If your business fails or you need to sell the property to fund retirement, it can take time. Your fund may be heavily reliant on a single tenant—your business—which creates a concentration risk.
Compliance Costs: There are significant ongoing costs, including annual audit fees, legal fees for the lease agreement, and property management expenses, all of which must be paid by the SMSF. You must also ensure the lease agreement is watertight and kept up to date.
More Projects
SMSF
The Power of Your Super : Buying Commercial Property with an SMSF
Using your Self-Managed Super Fund (SMSF) to purchase commercial property for your business is a powerful and popular strategy.
Year :
2025
Mont Clair Capital
Using your Self Managed Super Fund (SMSF) to purchase commercial property for your business is a powerful and popular strategy. It's a key way to leverage your retirement savings, but it's a hot topic because it comes with strict rules that you must follow to remain compliant. This is often referred to as acquiring a business real property within your SMSF.
Business Real Property :
The most crucial rule is that the property must qualify as "business real property." This means it must be used wholly and exclusively in a business. The property can't be used for private or domestic purposes. A common example is an office, warehouse, or factory that your business pays rent to use. The property can be leased to your business, but the lease must be on commercial, arm's-length terms, meaning the rent is at fair market value.
Compliance and Loan Structure: When you take out a loan, it must be a non-recourse loan. This means the lender's claim in the event of default is limited only to the property itself, protecting your other superannuation assets. This strict requirement is why a limited number of lenders offer these types of loans.
The Benefits :
This strategy offers several significant advantages for both your business and your retirement savings.
Tax Advantages: The rental income paid from your business to your SMSF is taxed at the concessional superannuation tax rate of 15%. If you plan to sell the property after you retire and are in the pension phase, any capital gains can be tax-free, as long as you have met certain conditions.
Asset Protection: The property is held within the SMSF, separate from your personal assets. This provides a layer of protection from creditors in case your business faces financial difficulties.
Asset Diversification: It allows you to diversify your retirement savings beyond traditional stocks and bonds by investing in tangible property.
The Risks and Considerations :
While the benefits are significant, it's essential to be aware of the risks and compliance requirements.
The Sole Purpose Test: The property must satisfy the sole purpose test. The primary purpose of the property must be to provide retirement benefits to the members. If you were to live on the property or use it for any non-business purpose, you would be in breach of this rule.
Liquidity Risk: Property is an illiquid asset. If your business fails or you need to sell the property to fund retirement, it can take time. Your fund may be heavily reliant on a single tenant—your business—which creates a concentration risk.
Compliance Costs: There are significant ongoing costs, including annual audit fees, legal fees for the lease agreement, and property management expenses, all of which must be paid by the SMSF. You must also ensure the lease agreement is watertight and kept up to date.