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Legal Tip 103: Sale of Business Property to your SMSF

Discussion in 'Legal Issues' started by Terry_w, 21st Nov, 2015.

  1. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    18th Jun, 2015
    Sale of Business Property to your SMSF

    A good strategy for small business operators involves selling a property that you currently own, or a related entity current owns, to a SMSF which you are a member of. There are even more benefits where you are running a business from that property.

    Potential Benefits are many

    1. Increased Asset Protection;
    2. Small business CGT concessions to reduce CGT;
    3. Use proceeds to pay off non-deductible debt such as the PPOR loan;
    4. Pay rent to your own SMSF and claim a deduction for it;
    5. SMSF pays little to no tax - 0% to 15% depending on a few things;
    6. A SMSF can borrow to pay for the property;
    7. Any future capital gains could be totally exempt from tax;
    8. Could be land tax savings;
    9. Stability as you will be dealing with a friendly landlord.
    10. Potential stamp duty exemptions.

    Potential Disadvantages

    1. Your net position would be the same, or worse for asset protection purposes;
    2. CGT on the sale;
    3. More complexity;
    4. Super assets and diversification;
    5. The property cannot be left via you will;
    6. Different asset protection issues – potential attack from within.

    Note that this can only be done with 'business real property'. Seek legal advice
  2. Property Hoarder

    Property Hoarder Active Member

    24th Jun, 2015
    If you are going to do this a number of things to remember.

    1. Have a lease in place. It needs to be legally enforceable.
    2. Make sure that rent is at market and on arm length terms.
    3. Sale needs to be at market. It will create a capital gains liability for you personally.
    4. If you do not pay the rent, you are expected to do as you would for an unrelated tenant. If that means kicking yourself out that is what you are meant to do.
  3. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    18th Jun, 2015
    Also be careful regarding the duty concessions. NSW for example has some very distinct issues that must be complied with. For example beneficially owners after transfer must not be changed or the duty can be clawed back. The property can become a segregated asset for the former owner/s. A scheme to change overall ownership can be a problem. Also the GST issues will require advice. Don't assume going concern is going to operate.