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Purchasing Assets in a Self-Managed Super Fund (SMSF) for Small Business Owners

Home » Small Business » Purchasing Assets in a Self-Managed Super Fund (SMSF) for Small Business Owners

For many small business owners, a Self-Managed Super Fund (SMSF) presents an opportunity to invest in assets that can both secure their financial future and support their business operations. However, purchasing assets within an SMSF comes with strict regulations, tax considerations, and strategic benefits that must be carefully understood.
At ALA Law, we provide expert legal guidance on SMSF investments, ensuring compliance with superannuation laws while helping you maximise your wealth-building strategies. We can also assist to pull apart a SMSF if and when required and can assist with complex property settlements in Family Law matters where business and SMSF’s exist.

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Why Consider an SMSF for Asset Purchases?

An SMSF allows small business owners to take control of their superannuation investments, including the ability to purchase property, shares, or other eligible assets. One of the key advantages is the ability to use the SMSF to purchase business premises, which can then be leased back to the business at market rates, providing both a tax-effective strategy and long-term security.

Key Considerations When Purchasing Assets in an SMSF

  1. Sole Purpose Test – Any asset purchased must comply with the ‘sole purpose test’, meaning it must be acquired to provide retirement benefits for SMSF members, not personal or immediate business use.
  2. Borrowing Rules (LRBAs) – If the SMSF does not have sufficient funds, it may borrow through a Limited Recourse Borrowing Arrangement (LRBA), which requires strict compliance with ATO regulations. This is usually created through a bare trust which will have a corporate trustee that holds the commercial property on trust for the bare trust which hold sit on trust for the SMSF. https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf/investing
  3. Business Real Property Exception – Generally, SMSFs cannot purchase assets from related parties, but an exception exists for ‘business real property’ (such as an office or warehouse used for business purposes), which can be acquired from a related party and leased back at commercial rates.
  4. Liquidity and Diversification – Investing too much in a single asset (e.g., a commercial property) could impact the fund’s liquidity and ability to meet retirement obligations.
  5. Tax Benefits and Implications – SMSFs benefit from concessional tax rates (15% on earnings, 10% on capital gains for assets held over 12 months), but non-compliance can lead to significant penalties. More details can be found on the Australian Taxation Office (ATO) SMSF page here https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf

Step-by-Step Process to Purchasing Assets in an SMSF

  1. Check SMSF Investment Strategy – Ensure the investment aligns with the fund’s strategy and compliance requirements.
  2. Obtain Independent Valuation – For property purchases, an independent valuation is needed to confirm fair market value.
  3. Secure Financing (if required) – If using an LRBA, ensure the lender’s requirements align with SMSF rules.
  4. Complete the Purchase via the SMSF – The SMSF must be the legal owner of the asset, with all contracts and funds coming from the SMSF.
  5. Meet Ongoing Compliance Obligations – Ensure lease agreements (if leasing to the business) comply with commercial rates and maintain proper SMSF records.

How ALA Law Can Help

Navigating the legal landscape of SMSF investments can be complex, but at ALA Law, we specialise in assisting small business owners with structuring SMSF property acquisitions, compliance requirements, and dispute resolution. Our experienced legal team can guide you through the process and ensure your SMSF investments align with both your business and retirement goals.

Final Thoughts

Purchasing assets through an SMSF can be an effective strategy for small business owners looking to build wealth while also securing business premises. However, strict compliance with superannuation laws and tax regulations is essential. Consulting with financial advisors and SMSF specialists will help ensure the strategy aligns with both retirement goals and regulatory requirements.

If you’re considering using your SMSF to invest in assets for your business, reach out to ALA Law today for expert legal assistance in structuring your investments effectively.