SMSF Insights | Do you own a business premises and value protection from future creditors?

It is uncommon knowledge that business real property can be owned by a Self-Managed Super Fund. The benefit for business owners lies in leveraging a super fund to free up capital and reinvest to improve the bottom line.

The benefits (including but not limited to):

Something that is often over looked when reviewing a balance sheet is: assets in super are typically out of reach for creditors.[1]
Business real property is excluded from the restrictive ban on related party ownership for assets held within Superannuation.[2]
The rent you normally pay to your landlord is sent to your Self-Managed Fund to boost your retirement savings.
Moreover, when in pension phase upon retirement, the sale of the property may be CGT free.

Does your property meet the business real property definition?[3]

It must be real property with 100% business use.
It does not include any rental or residential use.
Primary production properties are allowed.
Freehold or leasehold interest in property only.
Buildings affixed to the land are part of land.
Your building must satisfy the business use test.[4]

What is the business use test?

Real property is to be used wholly and exclusively in one or more businesses.

The property is to be used to an appreciable degree
Part of the property may not be used at all
The focus is on the actual use of the end user.

Written By: Tim Hannes | Advisor | Principal Edge Financial Services | May 2016

Note: This article is for general information purposes only and does not constitute advice. With all of these options there are a number of considerations outside the scope of what is covered in this article that you should discuss with your financial advisor to ensure your personal circumstances are taken into consideration.

[1] Bankruptcy Act 1966 SECT 116 (2)(d)(iii)(A): http://www.austlii.edu.au/au/legis/cth/consol_act/ba1966142/s116.html

[2] SUPERANNUATION INDUSTRY (SUPERVISION) ACT 1993 – SECT 66 (2) – BRP & Related party Acquisition: http://www.austlii.edu.au/au/legis/cth/consol_act/sia1993473/s66.html

[3] SUPERANNUATION INDUSTRY (SUPERVISION) ACT 1993 – SECT 66 (5) – Definition of BRP: http://www.austlii.edu.au/au/legis/cth/consol_act/sia1993473/s66.html

[4] SMSFR 2009/1 Para 20-39: http://law.ato.gov.au/atolaw/view.htm?docid=SFR/SMSFR20091/NAT/ATO/00001