One popular investment strategy employed by many small business owners is to have their business premises owned by their self-managed super fund.
There are three principal benefits of this strategy:
- An important business asset is held in a tax-effective structure.
- In the event of financial difficulty, creditors often find it more difficult to attack super fund investments (however, there are mechanisms for creditors to unwind transactions involving super funds).
- By using the capital held in a super fund a business can more efficiently make use of its own balance sheet.
When an SMSF owns real estate it is common to want to lease it to a 'related party' of the fund. When this occurs, then the property must be considered ‘business real property’ (BRP).