For many business owners, the first and most important decision involves where the business will be conducted – the premise and location.
Depending on the property and cost, you may consider either renting or buying. However, did you know that you can also acquire your business premise as an investment property at the same time?
This is an option for those who have a self-managed super fund (SMSF) to consider.
Investing in Premises
Deciding on whether you should purchase your business premises through the SMSF as an investment depends on various factors. Considering the gains and limitations will help you determine whether this option will suit you:
Freeing up capital
By acquiring your business property through the SMSF, you can free up much-needed capital which allows you more freedom to start and fund your business growth, while gaining a premise that has the potential growth in value as well.
Within super there is a high level of protection of assets, the property that you acquire through the SMSF is protected against insolvency which makes it an appealing option for businesses that may be subject to litigation due to the risks of your industry and nature of business.
During the accumulation phase, the income tax is at a low 15% – compared to individuals which can be up to 47%. It is possible that its earnings & gain upon disposal will not be taxed, as the law currently stands. This is a great advantage on top of the potential asset growth in value.
Responsibilities and Compliance
With the advantages also come obligations. As you are the trustee of the SMSF, you will need to have a clear understanding of your responsibilities and compliance matters. Other limitations include equity and earnings of the protected asset being locked within the fund and cannot be taken elsewhere.
Seeking Professional Advice
As you can see, there can be attractive gains with purchasing and investing in your business premise through the SMSF; including freeing up capital and resources, as well as the establishment of a potential growth asset that can have, under today’s tax laws, substantial taxation advantages apart from just it’s potential growth in value.
However, it is also important to understand your obligations, responsibilities, and ensure that you remain compliant. This is where you should invest in professional advice so that you can be confident that you start on the right foot.
We at Ozloans Finance specialise in providing advice for businesses that are looking into acquiring and investing their premise through an SMSF and have completed specialist SMSF lending and commercial property finance training, allow us to provide the expertise and be an integral part of your business.