The greatest anomaly of Australia’s superannuation system is that business owners do not have to pay themselves superannuation on a regular basis. So, they often don’t, and rely instead on selling their business to fund their retirement. But that leaves us open to too many possibilities between then and now.
What if you could use money you are already paying out as an expense to help purchase a retirement asset?
A Self Managed Super Fund is able to purchase residential or business property. The problem with residential property is that a related party of the SMSF trustees cannot use it prior to retirement, even if they pay market rates, and this includes that wonderful holiday house you have in mind.
But, with commercial or business property, the SMSF can lease it back to the trustees or a related party of the trustees.
So, if you run your business from retail/commercial premises (or even if you currently do not), you can purchase a suitable premise in an SMSF and lease it back to your business. That money you are paying to a landlord is now going into your super fund and helping to pay off the loan you may have had to take out.
This is what I call the great double dip. You claim the lease expense in your business at the respective marginal tax rate and the money ends up in your super fund, where earnings are taxed at only 15%.
Combine that with some regular super contributions and debt free ownership of the property looms more closely on the horizon.
But wait, there’s more. If you use the property to fund a pension once you reach preservation age and then decide to sell it, the SMSF (that’s you) pays no Capital Gains Tax – that’s something to think about and plan for!