Can You Buy A Property Using An SMSF And Rent It To Your Business? (Ep217)

Can You Buy A Property Using An SMSF And Rent It To Your Business? (Ep217)


Hey guys Ryan here from Onproperty and I’m
answering your questions and today we’re talking about, “can you use your super money to buy
a property for your business?” Alright, so I’ve got a question from Linda
and I’m going to read out the whole thing but it’s the bit at the end where the question
actually is. She says, “Hi Ryan, I’m thinking to buy a property in Portarlington, Victoria
using my super. 50 and four months ago I was retrenched, paid off all my debts and would
like to set up a self-managed super fund and use it to buy properties. Portarlington and
surrounding areas have seen growth in population in particular young families,” great that
you have done research, “Woolworths was opened last November, there’s petrol, small industrial
complex is being built as well as government funding to build a marina.” So it sounds like
there’s a lot happening in the area. You put in some research which is good or your local
which may not be good but I’ll touch on that in a sec. “My question is if I use my super
of approximately 300 K, do I have to permanently rent out the house or can I set it up as B
& B accommodation?” So out of that, the biggest question that
I got from that was, “can you actually use your super in order to purchase a property
that a business that you run inhabits?” The business actually rents the property from
your self-managed super fund. First I want to say, thank you Linda for your question,
looks like you’ve done some research into the area or you live in the area. The only
thing I want to say is if you live in the area, that doesn’t mean it’s not a good investment
but often people live in an area they feel comfortable in an area and they want to purchase
a property In the local area because they know what it’s like and it’s desirable for
them. But that doesn’t necessarily mean a property is going to deliver you the returns
you on either in capital growth or in positive cash flow in that particular area. So if you’re
just looking because you live local I would say if all the numbers stack up then go ahead
but just make sure you do the research and don’t just go off your intuition and your
knowledge, personal knowledge of the area. Do the financials behind it.
But let’s tackle the real question which is, “can you use your super to purchase an investment
property?” So I’ve actually done some research into this because it’s important that I just
provide factual advice on self-managed super funds. I can’t give any personalized advice
anything like that because I’m not a financial advisor or tax accountant. So basically I
was on this site which is called moneysmart.gov.au which is run by ASIC which is the Australian
Security and Investment Commission, so guessing that the information on this site can be pretty
useful. This is talking about self-managed super fund property rules and I’m going to
go through the rules and it might sound like you can’t do it but then they say at the end
that you actually can. So you can only buy property through your
self-managed super fund if you can comply with the rules. The property must meet the
sole purpose test of solely providing retirement benefits fund members. This means it has no
other benefits to you. It’s not a holiday house that you use, it’s not a property that
you personally live in and must not be acquired from a related party or a member which means
you can’t sell it to your spouse or you can’t sell it someone else in the self-managed super
fund. It must not be lived in by a fund member or any fund members related parties. So that
means you can’t purchase a house and your mum moves into it, you can’t purchase a house
and your sister moves into it or you can’t purchase a house and someone else in the self-managed
super fund lives in it. It must not be rented by any fund member or fund member’s related
parties. So they can’t live in it and they can’t rent it. However, your self-managed
super fund could potentially purchase your business premises allowing you to pay rent
directly to your self-managed super fund at the market rate. See the Australian Taxation
Office’s Web page for more information. Now the thing you’re going to need to be careful
about is if it’s a business that is a B&B you could potentially be living in there which
breaks the rules that I read out, must not be lived in by a fund member. However, a business,
a bed and breakfast could be running there if the business is paying your self-managed
super fund as long as you’re not living in there as well. It has to be for the sole purpose
of generating income for your retirement and if that’s a business premises and it just
so happens that your business is paying the rent then from the knowledge that I can get
from this website looks like that’s going to be fine. The issue will arise if you try
and live in that property yourself and run it as a bed and breakfast while you live in
it. Now I can’t imagine you running a bed and breakfast without actually living in it
unless you get someone else to run it and live in it cause I guess the nature of a bed
and breakfast is that you’re there, you’re providing the staff and you’re providing the
support to the guest and cooking for them and all that sort of stuff. I would say that
definitely sounds like a grey area and it would be something that you would need to
get advice about because on one part is breaking the rule another part says your own business
renting it is going to be ok. So bit of a tricky one. Sorry I can’t give
you a straight answer Linda. But I hope that has given you some clarification and at least
has pointed you in the right direction. With you just being retrenched if you don’t have
another job it looks like it would be difficult for you to get a mortgage for that property.
Now there may be some lenders that will lend you a certain amount but lending you all that
80% or 95% might be difficult for you, so definitely going to see a mortgage broker
if you’re looking to borrow money to purchase this property. I don’t know how expensive
properties are in the Portarlington area, so definitely speak to a mortgage broker if
you don’t have one you can get my mortgage broker give you a call just go to on property.com.au/mortgage
enter your name and mobile number he will get in contact with you and work out the best
situation for you. So if anyone else has any questions simply email me at [email protected]
or go to onproperty.com.au/contact and shoot me an email through the contact form there.
Until tomorrow when I answer another question remember that your long term success is only
achieved one day at a time

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