A popular investment choice, investing in commercial real estate through your SMSF has many advantages for business owners. You will require the whole cash value in the SMSF, along with stamp duty, to buy your business property outright (approximately 5 per cent). A Limited Recourse Borrowing Arrangement can be utilized to borrow money to purchase a commercial property (LRBA). A separate bare trust is established within your SMSF as part of an LRBA. This trust subsequently gives the smsf property legal ownership, while the SMSF trustees retain the benefit stake. This safeguards your SMSF if your home loan is in default because the trust now owns your property.
You require your lender’s permission to borrow money from your SMSF to use this approach. You’ll also need a deposit of between 30% and 40%. After that, you can begin leasing your property to anybody you like, including your own company, by setting up a commercial rent and lease agreement.
What advantages can SMSF property investments offer?
Economically sensible leasing
You can lease the parcel back to yourself when investing in commercial property instead of residential property. It is a wise decision for business owners who want to buy a building they can use as an office or factory.
When you buy a business property through your SMSF, your company makes the lease payments to your SMSF directly. With this income, you can increase your fund balance while deducting this leasing payment from your company’s taxes.
Income after retirement
Even after selling their company and starting the transition to retirement, many business owners will decide to keep renting their office space. You can add to your retirement income by renting your commercial property to the new business owner.
Any capital gains on your property are not subject to taxes if you are over 60 and no longer employed when you sell your business property.
For what else can your SMSF be used?
You have more possibilities with an SMSF than with a typical public fund because you are in charge of your investments. You could decide to put money into items like:
- Shares coming from Australia and elsewhere
- Products with fixed income
- Term deposits and cash
- physical products
- Art or collectibles such as old cards
It is a wise idea to review your SMSF possibilities with your financial advisor first. They can advise you on your financial objectives’ best course of action.
How to get help with your SMSF from your accountant and SMSF advisor?
It’s crucial to seek the proper guidance whether you’re considering investing in real estate through an SMSF or attempting to determine whether an SMSF is the best solution for you. You can get the assistance and direction you need from your SMSF accountant to decide whether taking this step will help you prepare for retirement. They can assist you by:
- Create your SMSF and take care of your continuing commitments.
- Obtain a loan to buy a home (if required)
- Fill out the annual tax and compliance paperwork needed to manage your SMSF.
- Install accounting software to provide complete transparency of your SMSF investments.
- Continue to offer investment guidance.
Therefore, seek guidance from a qualified financial expert if you’re considering establishing an SMSF and investing in real estate.
Furthermore, imagine that you run a tiny firm. If so, your superannuation assets are not considered when determining whether you qualify for the advantageous small business CGT reductions that apply when you sell your business or retire. So, if chosen carefully, smsf property might be highly profitable. Making a plan in advance will boost your ability to receive these concessions