How can you buy commercial property using SMSF?

 

Investing in commercial property can be a daunting process, and with so many funding options in Australia, it can be hard to know where to begin. If you really want to make this new venture work for you, it’s important you do it the right way. Using an SMSF (self-managed superfund) to buy a premises offers you lots of benefits, here’s why:

No landlords
It can be disheartening to pay out a significant amount of money each month to a third party. However, with an SMSF, you can effectively pay rent to yourself, as your funds will go towards your super fund and not into another person’s pocket, as is the case when using private lenders. This means you’ll be able to grow your investment more quickly. This rent can also be claimed as an expense when filling out tax returns as per normal commercial regulations. Within the SMSF, the rent is subjected to just a 15% tax, but deductibles on the lease are capped at 46.5%.

Additional tax benefits
If your property is held by the SMSF for over a year, when it’s sold, capital gains are only taxed at 10%. If you’re receiving a pension when you’re selling your property in the future, you won’t have to pay capital gains tax on the sale.

What’s the process of buying a commercial property using SMSF?
You’ll need to have the commercial property you wish to purchase valued by someone who is independent of your SMSF as well as qualified to do so. The selling price of the premises must also reflect the others currently on the market, as it’s important for the lease to be competitive in a commercial sense. Once purchased, rent payments will have to be made on time, despite being paid back into the SMSF, and will always need to meet the full amount. It’s important that the premises is used only for commercial purposes and is valued regularly following the sale. Ultimately, the property must continually offer benefits to all members of the SMSF for it to comply with its original purpose.

Are there any risks to consider?
As with any type of investment, there’s always potential downfalls. Because the property will be limited to commercial use, it may be more difficult to find a buyer for this market should it be more viable to sell the property than maintain it. Owners could also struggle with covering the costs of maintenance and insurance, which they will be liable for, as these can quickly mount up and put a strain on their finances.

However, one of the main things to consider is whether the investment will offer long term returns. Although it’s ideal for those wishing to run a business, the property may struggle to meet the requirements it set out to in the beginning. A large part of using an SMSF to invest in commercial property is the retirement gains members can benefit from, so if large amounts of the fund are focussed in this single asset, it can be a difficult goal to realise.

Busting 3 myths about commercial loans

 

Whether you’ve been in the fickle world of business for a year or for fifty, you could find yourself needing a sum of money in a pinch – but you don’t have it to hand, at least right now. Despite it being a common problem for many, applying for a commercial loan is still deeply stigmatised and fogged by myths. Read on to discover the most believed myths surrounding commercial loans, and what the truth really is when it comes to financing your business into the future.

Myth: Without a perfect credit score, you won’t get a loan
This is one of the most common myths – and also one of the most untrue. While it’s accepted that generally possessing a good credit score improves your chances of being accepted, having a bad credit score isn’t the be-all and end-all. If this applies to you, consider going through an alternative lender rather than a traditional big bank. They will likely be more understanding of wider circumstances than a traditional large bank would, and be more willing to offer small commercial loans.

Myth: Without a business plan, your application will be rejected
Another assumption about commercial loans that is ultimately shrouded in falsifications is that you won’t be accepted for a commercial loan without proof of a business plan. While it’s true that this is the case if you’re looking for a small commercial loan with a bank, it isn’t a simple blanket scenario that fits every application. Generally, if you apply with an independent loan company, a business plan won’t be needed – they simply look at the business in its entirety and judge it based off that.

Myth: Applying for a loan is lengthy and fraught with obstacles
Again – this may admittedly be true when it comes to dealing with big banks. However, going through alternative financing methods can mean that you receive a loan within a matter of days. This depends on the business and the group you’re applying for funding from, but time is money and being able to bring delays down to the shortest period possible means that your business can get productive as soon as possible.

Since being established in 2001, Global Capital has long been the go-to choice for commercial loans, development finance, and SMSF loans. Global Capital is trusted by more than 6,500 commercial brokers and offers second-to-none access to well over four hundred lenders such as private investors, banks, and institutions. Get in touch today to learn what we could do for your company.

For more details visit our website https://www.globalcapital.com.au/

What you must understand about the SMSF Loans

Gone are the days when an SMSF could not borrow fund and invest in assets. However, several rules related to taxes were relaxed in 2007. The rules associated with SMSF loans have been reversed in recent years. The most current regulations provide for the following certain rules and restrictions.

The best part is that the Federal government has kept its promise by not making any major change in the SMSF loan rules. The treasurer in his Budget speech did not touch the limited recourse borrowing arrangements (LBRAs). However, he surely made a pre-budget commentary and said that the government may improve on the Financial System Inquiry’s using a part of the budget.

Now, there are several reasons for SMSF borrowing.

ü  SMSF borrowing provides that funds can be invested in assets where they do not have sufficient cash allowing for purchase.  The SMSF loans also provide for tax deductibility on franking credits, interest payments within the funds. The fund can be used to diversify various kinds of investments and help in improving income and growth. 

ü  The different types of investments covered by SMSF loans include residential and commercial property, shares, land, factories, machinery and also the farms. The restrictions applied to the SMSF loans are stringent. However, in some cases, they are subject to interpretation.

ü  The ease of borrowing makes the SMSF loans the preferred option. The lender in the case of SMSF loans should not necessarily be a bank or a financial institution, but it can be a family member, business partner or even a fund member. Repayments must be made from investment earnings or superannuation contributions.

Challenges associated with borrowing the SMSF

Complex rules are linked with the superannuation loans. For example, SMSF borrowing of the assets are just under limited resources borrowing arrangement (LRBA). This states that only one asset can be acquired from the collection of identical assets under a single borrowing arrangement. The single asset becomes the security for the loan. It is held in the holding trust till the repayment of the loan. Assets cannot be replaced or improved on except in certain exceptional cases.  The assets can be repaired but many times the difference between repairs and improvement may not be clear cut. However, the difference is understood in this example. Renovation of an older home may be required and it is allowed. However, adding an extension is clearly not permitted, at least not from the borrowed fund.

You can get more clarity on using the SMSF loans and see a home you can leverage their various benefits reaching out to the experts at Global Capital.