SMSF & Commercial Property-SMSF Auditor

Investing in commercial property

Generally speaking, investing in commercial premises through an SMSF has some advantages over residential properties. The rules relating to holding residential property in an SMSF very clearly stipulate that the property can’t be rented or occupied by you or any other trustee. It also can’t be rented or occupied by any relation to the trustees. 

Investors who think they can purchase a holiday house in their SMSF to enjoy over the summer will need to think again; the rules are clear and strict. Investors who already own an existing residential property can’t transfer the property into an SMSF by acquiring it at market value or contributing it within the cap limits.

While commercial properties can be sold to an SMSF by its members, as well as being leased to SMSF trustees or an individual or business related to them, there are still a host of considerations.

Holding commercial properties in an SMSF is open to all SMSF trustees, not just small business owners. To purchase a commercial property in an SMSF, a fund may apply for a specific SMSF loan. However, the criteria are stricter than traditional lending with tighter loan to value ratios.

Many small business owners use their SMSF to purchase a business premises and then pay rent direct to the SMSF. It’s important to get this right; the rent paid must be at the market rate (no discounts) and must be paid promptly and in full at each due date.

The investment must also satisfy the overarching function of the SMSF, which is to provide retirement benefits for its members (this concept is known as the sole purpose test).

Call 03 9404 2737 or JULIUS@ACCOUNTANTSANDTAXAGENTS.COM.AU

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