This article was written by Mel Zander and first published in the Coffs Harbour Advocate.
An increasingly popular strategy for business owners is to use their self managed super fund to purchase their business premises. Having your business pay rent into your super fund can be a great way to grow your nest egg, because unlike other types of contribution, there is no cap on market-rate rental payments.
It is important to have experts on your team before making any investment decision; especially inside the tightly regulated self managed super space. I asked Cherie Parik from Your Commercial Property Specialist to share her expertise in commercial real estate.
How can I be confident my business premises will be a good investment?
Be careful not to get emotional. When you’re about to put your sign over the door it can be easy to get carried away. Make sure the numbers stack up and do your due diligence. We recommend engaging contractors to inspect the property and provide a detailed report. This helps ensure there will be no post-purchase surprises and sometimes the report can even be used to negotiate the price.
Can I set whatever rent I want?
No. To comply with SMSF guidelines you must have a formal lease arrangement between your fund and your business. Rental must be set at market rates. A good commercial real estate agent should be able to advise you.
Is it OK if I miss a couple of month’s rent, so long as I catch up my payments?
No. It’s really important that the lease arrangement is seen to be enforced. If you give yourself a break during a tough time (or just get sloppy) the whole arrangement could be deemed non-compliant.
Is it ok for me to manage the property myself or do I need an agent?
It is legal for you, as a trustee of the fund, to manage the lease arrangement. However, you will need to make sure you enforce all the terms of the lease.
If you don’t have experience managing commercial property it can be a good idea to engage a commercial real estate agent to manage the property. This takes the onus off you to make sure all the i’s are dotted and t’s crossed on lease compliance. It also serves to reassure the ATO of your fund’s compliance.
It is important to get advice before entering into this type of investment. On 12 October you can get all the answers in one place when our team of experts present a free seminar on Buying Property in Your Self Managed Super. Join us! Click here to register.