Transferring a business property into your SMSF

Given the current downturn in property prices, business owners may be rethinking their strategies in holding property.

One option to consider is transferring business real property into a self-managed super fund (SMSF). SMSF members can transfer business real property into their SMSF by using a combination of methods.

Cashing in your SMSF

Business owners can use the cash available in their SMSF to buy their business property at market value as a normal cash purchase. The property must first be valued by an independent and qualified party before this is allowable. SMSFs that do not have sufficient capital to do this may consider using their non-concessional contributions cap to cover the outstanding balance.

Limited recourse borrowing arrangement (LRBA)

In the event that you do not have enough cash in your SMSF to outright buy your business property, you can apply for a loan using an LRBA. An LRBA can be obtained through a third-party lender, including your own business. However, before applying for an LRBA, consider whether your SMSF will be able to maintain loan repayment fees on top of existing fees you may have.

CGT retirement concession

The CGT retirement concession allows business owners exemption from CGT on business assets up to $500 000 over a lifetime. If you are over 55, there are no associated conditions, however, if you are under 55, then you must place the money into a superannuation fund to receive the exemption. This means that if you are under 55 and wishing to transfer a business real property into your SMSF, you can do so without incurring any CGT liability (up to $500 000).

Should you have any queries, please contact our office to discuss your options.

Disclaimer: This article contains general information only. Regrettably, no responsibility can be accepted for errors, omissions or possible misleading statements or for any action taken as a result of any material in this guide. It is not designed to be a substitute for professional advice, as such a brief guide cannot hope to cover all circumstances and conditions applying to the law as it relates to these items.