Key Parts of SMSF Loans and Their Benefits
As an Australian business owner, you’ve probably heard the words SMSF loans at least once or twice during your line of work. There’s a good reason for this. An SMSF loan is a home loan that is run by an SMSF to then buy or invest in commercial and residential property. The profits from the investment—whether they are income for rental or even capital gains—are fed directly back into the super fund, increasing retirement savings. So for any business owner, it’s clear to see why an SMSF loan is a smart investment in long-term planning.
Using Property for Business Only
It is important to note that this residential and/or commercial property would not be available for any member of the fund or even related associates to live in or lease the property. This would be a breach within the legal procedures set forth when investing in an SMSF loan.
Keeping Business in the Family
Businesses that are family owned and operated should consider an SMSF loan. If you and your relatives already have or want to invest in a business, SMSF loans can help with the retirement of members within the company. Because these loans work with investment in property, they are more beneficial in the long-term. In passing your business on in the family, you are both extending and maximizing these long-term benefits.
The Many Benefits of SMSF Loans
SMSF loans come with many benefits, particularly when they are for the purpose of purchasing a property.
Some benefits are included but not limited to:
- Tax liability—your tax may be minimized as your interest expenses can be written as a tax deduction by your SMSF loan.
- Loan defaults—If you have a loan default, your other SMSF assets will be protected because your lender will not have recourse to the assets in your SMSF.
- Property purchase—These super funds are available to purchase property beyond the availability of its own funds.
- Steady income—SMSF will still experience capital growth and even income, even if the property is not yet fully paid in. The incoming money from the property can go towards paying off the loan.
Reach out to an expert if you are interested in an SMSF loan. The process can be complex and time-consuming, so it is best to turn to someone that understands the legal process well and can help you safely and securely manage your accounts.