Business real property

For many business owners, the ability of a SMSF to acquire business real property can provide several potential benefits. Generally, an SMSF is unable to acquire an asset from a member or related party of the fund, but business real property is an exception to the rule. Acquiring residential property from a member would generally not be permitted.  However, there is no issue with an SMSF acquiring residential property from a 3rd party at market value. 

Business real property consists of land or buildings used wholly and exclusively in running a business (whether carried on by a member of the SMSF or some other party). This would include shops, factories, offices, etc.

Transferring business real property into an SMSF may be attractive for the following reasons: 

• To release capital back into the business or to the members directly (by selling the asset to the SMSF depending on ownership).
• To provide tax concessions on future investment earnings (net rental income and assessable capital gains are taxed at 15% in accumulation stage and zero in pension phase in super compared to marginal tax rates if held in the members’ personal names).
• To offer some bankruptcy protection
• Assets of an SMSF sold during the pension phase are exempt from CGT.