|Commercial Property Leasing Tips and Traps|
As a savvy investor, you’re probably always on the lookout for new opportunities to grow your portfolio. One such opportunity that’s been gaining traction in recent years is investing in commercial property with your self-managed super fund (SMSF). With the Australian property market showing signs of rebounding after the pandemic, now could be the perfect time to explore this option.
The Self-Managed Super Fund (SMSF) is a popular way of investing for the future. It allows individuals to take control of their financial future and invest in a variety of assets, including commercial real estate. Many people overlook this option because they believe it’s too complicated or risky, but buying commercial property with your SMSF can provide significant benefits. In this blog post, we will explore five key benefits of buying this property with your SMSF and how it can help you achieve your investment goals.
Here are 05 benefits of investing in commercial property with your SMSF:
1. Lease to your own business
The most notable benefit of SMSF investment into real space is the ability to lease the property back to a business owned by a member. Unlike residential property, which prohibits members, relatives and known parties from residing in, staying in or benefiting from the asset, this property works differently.
Providing the retail space is leased to the business at true market value on an arms-length arrangement, fund members can operate a business from the SMSF-owned Office space rental. SMSF commercial rental determinations are best established by a qualified real estate valuation professional, to ensure your fund remains compliant with the ATO’s SMSF commercial property valuation requirements.
2. Grow your fund and reduce business overheads
Leasing SMSF-owned Office buildings back to your own business have multiple benefits. Not only will you grow your fund faster by paying market value rent in line with your SMSF commercial property valuation, but you can reduce business overheads, too. By contributing to your retirement savings and paying rent you’d otherwise be paying a landlord at the same time, your money works harder for your financial future.
3. Tax benefits on rental income
When your own business leases a commercial property owned by your SMSF, the rental income is taxed at the concessional superannuation rate of 15%. Not only are you reducing your tax liability when compared with property owned outside of your SMSF, you’re paying market value rent which reduces your business tax liability, and only paying 15% tax when it hits your superfund.
4. Enjoy long term leases
If you decide not to lease your SMSF-owned commercial property to a member-owned business, you may still enjoy significant benefits. Commercial properties tend to yield higher returns than residential properties, and can secure longer term tenants. This could provide greater cash flow potential for your SMSF.
5. Diversify your asset portfolio
Buying commercial property with your SMSF is a great way to diversify your asset portfolio. When combined with other investment classes that collectively contribute to your fund’s predetermined investment strategy, an industrial property may provide welcome diversity.
It’s important to remember that all SMSF investment activity must be carried out with the sole intention of growing your fund for retirement. While leasing investment properties back to your own business is beneficial, it has to be reasonably in line with your fund’s strategy and retirement plans. For more information on investing in commercial property with your SMSF, and obtaining the necessary SMSF property commercial valuations to remain compliant, reach out to SMSF Valuation Reports.
Information in this article is general in nature and does not represent true SMSF financial advice.