5 Benefits of Buying Commercial Property With Your SMSF

commercial property buying

Property investment is one of the most popular reasons Australians commence a self-managed superfund. Aussies love property, and being able to invest your retirement savings in the real estate market is an attractive option for those looking to take control of their superfunds and go self managed.

Investing in residential property with your SMSF can be great for both capital growth and cash flow investments, but commercial properties are becoming an increasingly popular choice for Aussie SMSF members.

Here are five benefits of investing in commercial property with your SMSF:

1. Lease to your own business

The most notable benefit of SMSF investment into commercial property 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, commercial property works differently.Providing the commercial property is leased to the business at true market value on an arms-length arrangement, fund members can operate a business from the SMSF-owned commercial property. 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 commercial property back to your own business has 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, a commercial 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 a commercial property 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.


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