SMSF for Commercial
SMSFs can invest in a wide range of assets, including commercial property. Investing in commercial property through an SMSF can be an attractive option for individuals seeking to diversify their superannuation investments. Provided the investment is done in compliance with relevant regulations, listed below are some of the key advantages
SMSF Asset Diversification | Stable Income Stream | Capital Growth | Tax Advantages | Control and Flexibility | Limited Recourse Borrowing
Asset Diversification
Most investors generally start their investment journey with a residential property as it is considered a safe haven. Commercial property in SMSF can help diversify the portfolio and spread risk across different asset classes. Diversification reduces the overall financial impact on SMSF, in case one of the sectors was going through a poor performance phase.
Stable Income Stream
Commercial Property in SMSF is generally considered to have a stable revenue stream compared to the residential counterpart as Commercial Leases are generally long run, and the tenants prefer to stay for a longer period due to the costs associated with the move. The tenants often make large investments in a rented commercial property as required by their business, which justifies them staying in the property for a longer period.
Capital Growth
Commercial Properties in Australia have seen a significant growth in the last few years. Like any other real estate, with the growing demand and other factors such as location, economic conditions and need for local storage, Commercial properties offer a great growth opportunity, which then contribute to overall strength of your SMSF portfolio and retirement income.
Tax Advantages
SMSFs also offer tax advantages which can often work better for commercial properties with high rental returns. Tax on rental income in SMSFs is calculated at a concessional rate and the Capital Gains Tax in SMSF is also lesser in SMSFs compared to outside SMSF. Discounts on Capital Gains Tax for property held for more than 12 months also makes the Commercial Property purchase option in SMSF more attractive.
Control and Flexibility
Self Employed applicants love the control and flexibility that is available for buying a Commercial Property in SMSF. Unlike residential property, Commercial Property purchased in SMSF can be used for member’s own business. It is often seen as an excellent strategy as you can use your regular Superannuation contributions to fund a property that your business can use and any investments you make in the property become part of your Superannuation and retirement funding.
Limited Recourse Borrowing Arrangements
Lending is permitted to buy a Commercial Property in SMSF based on the Limited Recourse Borrowing approach, which makes it possible to buy an expensive property with as little as 20% deposit. This is where our team of brokers offer their skills and expertise to assist you plan the purchase based on the most cost-effective option. We have a panel of lenders that we review to help you find the best solution within the given compliance framework by the ATO.
