SMSF owning a business

So the ATO site indicates SMSF can own a business but excludes related party transactions such that a business cannot be used to syphon money out.

Where does all that leave a business where we are the operator? Can you draw a wage for your time at all?

Or is a SMSF effectively limited to 'managed' businesses or operations like say a coin laundry where only minimal time is needed? And you still need to earn your income elsewhere?

 

What do you mean by run a business?
It would be pretty rare for a SMSF trustee to run a business, more common would be to own shares in a company that runs a business.

Either way you have to manage the SIS Act laws, Tax Act laws and trust law.

 

I'm pretty sure this isn't possible. SMSF's are meant to be at 'complete arms length' (that is, as you said, related party transactions are prohibited). For example, the SMSF couldn't pay royalties or consultant fees to your business, which ultimately ends up in your pocket. Check this out Can I pay myself for services provided to my SMSF? - Your Money | Switzer
But here is a kicker, your SMSF can own a property and rent it out to your business as the tenant - Go figure

 

Related parties can contract and still be at arm's length. For example a member could be employed and paid market level wages and be dealt with at arm's length.

It would be extremely rare for this to happen though -a SMSF running a business.

 

Did a google and even the ATO say it is possible (but will be looked at closely):
Carrying on a business in an SMSF

 

My main interest is actually whether a SMSF can purchase the business.
Most info via searching relates to super investing in or loaning to an existing business.
If a company was needed or preferable as an intermediary then the SMSF would need to loan the company funds to acquire the business (is that allowed and would that be subject to the 5% in-house rule?)

I'm putting the question of wages aside for now. Assume all proceeds remain in the SMSF for retirement benefit.

 

The requirements of sis reg 13.22 must be complied with
SUPERANNUATION INDUSTRY (SUPERVISION) REGULATIONS 1994 - REG 13.22C Assets acquired after commencement of Division 13.3A (Act s 71)

(if the SMSF was investing in a company by subscribing for shares)

 

So why not just have the SMSF buy the business directly to avoid potential issues with that?

 

The main reason would be asset protection. The person running the business would be entering various contracts and exposed to negligence claims so their personal assets would be at risk. A company is a separate legal person to its shareholders so if a company is sued the shareholder's assets are safe (unless they have given guarantees, or security etc)