Business owners who purchase their workplace property through a self-managed super fund (SMSF) can pay rent to themselves, rather than a landlord.

Using your SMSF, you can purchase the property in which you run your business. You can then lease this commercial property back to your business – you become the tenant and you pay the SMSF a commercial rate of rent.

Not only does this help free up funds to expand your business, but it also gives you a valuable long-term asset to grow your SMSF for retirement.

When purchasing a commercial property through your SMSF, it’s advisable to seek professional guidance to find out the full extent of rules and regulations. One rule to be aware of, for example, is that the investment must be maintained on a strictly commercial basis. There is no wriggle room for rental payments to be missed or not paid in full. The lease must be at the market rate and the property regularly valued independently.

Your SMSF can invest 100% of its money in a commercial real estate property provided a member of the fund runs a business through that fund. Alternatively, your SMSF can borrow to buy your workplace property if certain criteria are met. These borrowed funds can be used to maintain or repair the property, but not to build or make improvements.

Like any super investment, there are pros and cons to holding a commercial property in SMSF. A positive is that your investment will grow quickly because the rental returns are generally higher than for residential properties. On the flip side, capital gains on your commercial property may not be as impressive as for residential investments.

It’s also worth noting that there are considerable compliance costs in buying and maintaining either a residential or commercial property through a SMSF. These setup and ongoing costs should be balanced against the long-term benefits.

There are many tips and tricks to be aware of when it comes to investing within your SMSF. Give us a call if you are interested and we can point you in the right direction.