Rules for SMSFs buying your own business premises

Self-managed super funds (SMSFs) are a way to help you save for your retirement and like all investing, certain rules apply while transacting in property.

Let’s say you want to sell your business premises to the fund.

In an SMSF, its members are generally the trustees meaning they run it for their own benefit.

According to the Australian Taxation Office, while SMSFs are not allowed to buy assets from, or lend money to, fund members or other related parties, they can acquire ‘business real property’.

Defined as a property used exclusively for carrying out a business, the fund is allowed the purchase and sale of business real property provided the deal is done at market value and income from the asset reflects a true market rate of return.

Factory, warehouse or a shop all qualify as business real property.

A house used for private or personal purposes can also meet the business real property criteria if the land on which it is located is used primarily for business, such as a farm. Additionally, the house must be in an area of land not exceeding two hectares.

The investment must also be in line with the investment strategy of your fund, such as diversification, liquidity and ensuring members’ returns are maximised.

Raine & Horne Commercial’s executive chairman Angus Raine noted late last year in a news post that “assets priced between $1 million and $3 million were very popular with yield hungry, self-managed super funds.”

Another post on R&H late last year said volatile share markets and poor cash returns were pushing investors and self-managed super funds into Brisbane commercial properties priced from $1 - $2 million.

Among the benefits of your SMSF buying the property is potential tax concession on any income and capital gains from the property. 

As with other super fund assets, there can't be a loan or covenant (charge) over an asset (unless the asset was acquired under a limited recourse borrowing arrangement), according to the ATO website.

These are only general guidelines and if you are serious about your SMSF buying your business premises, it’s best to get professional help.