Superannuation legislation allows Self Managed Superannuation Funds (SMSFs) to borrow to invest provided certain conditions are satisfied. If you are a business owner, you may now be able to use your superannuation and borrow to buy your business premises within your SMSF.
This arrangement offers some advantages:
- Your SMSF receives all income and capital growth, even if the property has not been paid off.
- Your SMSF can use income from the property to help pay off the loan.
- Interest expenses may be claimed as a tax deduction by the SMSF, potentially reducing your SMSFs tax liability.
- Because the property is purchased using a limited recourse loan, the lender only has recourse over the property itself – meaning the other assets in the SMSF are protected in the event of default.
- Income after expenses and any capital gain on disposal may be taxed at lower rates (i.e. 0% – 10%) in the hands of the SMSF.
There are a number of complex rules and regulations around buying business premises inside an SMSF, so it’s important to seek professional financial, legal and tax advice specific to your circumstances.
Some of the key things you should consider include:
- Your SMSF trust deed must allow borrowing.
- A legal or accounting professional should establish the trust structure to ensure it meets certain requirements.
- Your SMSF must have the ability to meet the repayments over the term of the loan.
- Arrangements must be at arm’s-length and transacted at market rates.
Quinn Financial Planning has the expertise to help you build your wealth. For more advice on investing in a Self Managed Super Fund, please contact Peter Quinn here at Quinns by submitting an
online enquiry or calling us on 9580 9166 to book an obligation free appointment.
The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.