Legal Advice 

Use Your SMSF to Buy Your Business Location

Many business owners are using a unique strategy to transfer or purchase their business location into a Self-Managed Superannuation Fund (SMSF). Authorities estimate that more than one million Australians have changed from an Industry or a Retail fund to a Self-Managed Super Fund. According to and others, this is the most rapidly-growing superfund type in Australia. In short, the business owner or the business uses the SMSF technique to become the tenant that leases the property.

This strategy is advantageous to a business owner because it helps him/her afford a property that may have been unaffordable otherwise. Assets owned by the SMSF are protected from creditors during times of the business’s economic downturns. The strategy also is advantageous taxwise. And it provides the business owner with more authority over the utilization of the business location.

Part of the Superannuation Industry (Supervision) Act’s process (also known since 1993 as the SIS Act) can facilitate loans to help the SMSF if lending procedures are followedcorrectly. This option is a key strategy when the SMSF needs more money to conclude the purchase of the business premises.

A bank or other established financial resource may issue a standard lending package or even one designed for an SMSF loan. The SMSF also might be able to borrow monies from the business owner as an individual or from a relative of that owner. But the transactions must be regarded as if the participating parties are unrelated.

A loan agreement between the business owner (or other associated entity) and the super fund is required to be appropriately distanced and documented to comply with the SIS Act. The details of the loan must be supported by written documentation finalized for the business lending agreement. And the loan must be serviced appropriately to withstand inspections by regulators and auditors.

Employing a knowledgeable and experienced professional is highly recommended to avoid the procedural pitfalls that are possible in the undertaking of transferring or buying a commercial building or property to an SMSF. A trusted advisor can help you avoid severalcommercial lease agreement QLD missteps, including but not limited to:

  1. Failure to learn a lender’s mandates and to seek loan pre-approval before calculating costs
    2. Purchasing a property before the registration of a trustee or setting up the SPSF appropriately
    3. Registering the holding trustee as the one borrowing instead of as the SMSF trustee
    4. Allowing the holding trustee to do more than hold the legal title
    5. Misunderstanding the regulations for using the borrowed monies for maintenance and repairs instead of for upgrades
    6. Using trust deeds for the SMSF that are outdated
    7. Erroneously establishing the holding trust and the SMSF
    8. Using monies from sources other than the SMSF to pay SMSF-related expenses
    9. Creating a retirement phase that disregards needed access to cash during that period
    10. Exceeding appropriate boundaries with the creation of a “replacement asset.”
    11. Inconsistently recording and reporting existing or anticipated contributions
    12. Not abiding rules related to “single acquirable assets.”
    13. Not empowering one person with the responsibility of procedural management and control
    14. Missing the stamping deadline for the holding trust deed
    15. Ignoring insurance needs on the lives of the SMSF members, contribution capabilities or the property itself.

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