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How Can You Add Value to Your SMSF With Business Premises

Adding value in your self-managed super funds (SMSF) property is a smart move. SMSFs can buy investment properties that are outside the super funds. However, you need to make sure the SMSF property investment strategy is properly rented out.

SMSFs are not banned from putting a business. However, the business should be operated for the sole purpose of providing fund members with retirement benefits and is permitted under the trust deed.

The laws governing SMSFs limit or forbid activities that other businesses have, such as having overdrafts or entering into credit agreements. Therefore, before you start adding value to your SMSF carrying on a business via your SMSF, make sure to seek professional advice from a tax accountant near you. 

SMSF Property Investment

SMSF property investment offers a wide range of benefits to investors, such as: 

  • Investing in a tax-free way means that you can invest much larger amounts than through an unlisted managed fund or individual share. This makes it easier for your portfolio if you have the money.
  • Property investments aren’t just for shares and term deposits. Direct property investment can be a great way to get into the market, but it’s important that you do your research.
  • SMSFs can also use their property investments as loan security, which includes self-secure loans with the fund’s bank account. 

Investing in SMSFs is a great way to diversify your investment portfolio and use other people’s money via SMSF loans. You can get loans secured against property within an account, which means that when interest rates go up they will still be worth the same amount. 

If you have an investment in SMSF property, then it’s important to know that these funds will be treated as separate entities for income tax purposes. This means all profits made off of your investments go back into the account where they came from without being taxed again.

Is it Possible to Invest in a Private Company?

Your SMSF is not limited in the investments it can make. However, if you have controlling voting rights within your company, then any investment will be considered an ‘in-house asset’ and cannot exceed 5% of total assets for this type of fund or retirement scheme.

The ATO has a Tax Ruling 2009/4 that may be of assistance in determining whether or not an investment made by one company is regarded as related parties. The moment you control 50% of a company, the company’s investment is deemed as an in-house asset. 

Can I Improve My SMSF Property?

If there’s enough cash on hand and permission granted by all parties involved then, yes, you can. You can make any changes you want to your SMSF property purchase, even if it’s not in conjunction with a mortgage. You are free to do whatever you want with your SMSF funds, as long as it’s within the rules set out in that deed. 

Can I Add Money to My SMSF?

Selling your business is the perfect way to contribute some money to your SMSF. You can put up to $500,000 into your SMSF without paying any taxes in either place, and this is per person with lifetime limit. A tax accountant in Sydney can provide a more intricate explanation about this for you. 

The small business concessions are a lifesaver for any entrepreneur. You can add up to $1,415,000 from your business’ sale, which is tax free. This is, without a doubt, an enormous saving. 

Can I Sell My Commercial Property to My SMSF?

The SMSF has the ability to purchase most types of properties, from commercial, residential and factories to vacant land and so on. Whilst SMSFs can purchase commercial properties from related parties, it is against the SISA to transfer or sell a residential property to the SMSF. 

Moreover, the SMSF is not prohibited from selling their residential property investment to a fund member or related party.

Rolling existing assets into your SMSF could be a great way to save tax and continue running the businesses you already have. You’re not able to use residential property, but there are plenty of other things that would work well. 

Can I Share Existing Assets?

Contributing existing assets to your SMSF is possible. This includes the properties that your business manages, from cash, term deposits, direct shares and so on. However, a residential property is the only asset you can’t roll in. 

About Commercial Lease Agreements

The moment the property is set up within the SMSF, there is a mandatory lease arrangement between the trustee and the related parties drawn up. 

It is recommended that a solicitor must be engaged to set up a fully documented, commercial, lease arrangement between the business and the SMSF trustees. It’s also important to specify rent in the contract and outline the repercussions of not paying rent on time. 

How to Legally Purchase Business Premises

You can buy business real estate from related parties with no problem if you’re in an SMSF. 

You might not think this way, but buying residential properties is different because those are owned by individuals, so it’s always best to consult an expert before making any decisions.

The requirements for SMSF business property are fairly straightforward. The land has to be exclusively used in a commercial enterprise, and it can’t just house residential apartments above its storefronts, otherwise, there will be no sale. 

Moreover, the only purpose for such a transaction is to invest in funds that provide retirement benefits for its members. 

How Malkoun & Associates Can Help You

If you want to know more about this and SMSF, Malkoun & Associates are the professionals to call. From SMSF establishment, administration and audits to tax advice, tax consulting and preparation of annual financial statements, we can help you.

We don’t just work with clients, we work with you to achieve your goals and dreams. We pride ourselves on service and quality, with our mission which is to be a proactive, professional and efficient accountancy firm in Australia. Contact us today.