I’m think of buying a commercial property using our SMSF and then leasing the property through my business. We operate as a sole trader is this possible or would the lease need to be in a company name?
What you are proposing fits within the rules of SMSF, it is acceptable to lease a commercial premises to a related party.
Under your SMSF, your adviser will need to go through the advice and the resolutions to ensure that the purchase meets the purpose and the strategy of the SMSF.
It is also possible to borrow a portion of the funds if required subject to normal lending policy and criteria
Please feel free to ask any further questions you may have
As Scott noted, you are allowed to lease a commercial property to related party for business purposes. Make sure it fits within your SMSF investment strategy, liaise with you financial planner and accountant to make sure it is set up properly, and do it before you sign the contract.
You will need to lease on a standard third party arrangement format (i.e. market rates etc.) and make sure you are not falling behind on the rent. you should also be getting the valuations of both the rent and the property value done every second year to keep the SMSF accounts up-to-date.
Make sure you get the advice on the investment before you jump in too far.
This can be a very powerful strategy if executed correctly.
Funding might be difficult given the way the banks have exited the space but it's still possible.
As per Tod's comments, you need to have a lease on standard terms as if your business was leasing from a third party, then there's a number of SMSF administrative requirements to cover off and ensure it's all above board.
If you need some help, please let me know.
All the best.
I just would like to stress the point that you CANNOT fall behind in rent if the SMSF owns the property.
The ATO view is that if the SMSF allows the tennant to fall behind in rent, then this amounts to providing a "benefit"
If this happens before the members retire, the fund will be deemed to be "non-complying"
A "non-complying" fund pays tax at 45%.
and that eliminates 99% of any benefit you may have had in setting up the SMSF in the first place.
soooooo......make sure you know what you CAN and CANNOT do when you are leasing commercial property from a SMSF!!!!!!