Superannuation has a long history in Australia, with tax benefits to superannuation savings introduced over 100 years ago in 1915. In the 1980’s, 51% of Australians were covered by compulsory super through legislation and union requirements. Compulsory, employer paid superannuation was introduced into Australia in 1992 as a means to protect the retirement savings of Australians and reduce the burden on the aged pension. In 1999, self-employed individuals and small business were authorized to set up self-managed super funds and in the 2000’s, the legislation was changed to allow freedom for individuals to chose super funds, which opened the door to SMSF’s for all.
For Small and Medium Enterprise shareholders, owners and directors, superannuation can be an annoyance where their preference would be to divert funds into business investment. Having said this, there are a multitude of benefits to borrowing within a SMSF, including tax benefits, and diversion of compulsory payments to business investment. In conjunction with advice from a skilled accountant or financial planner, investment plans through your SMSF in property, units or equities can allow you to unlock the equity in your superannuation for investments you have control over.
The most common of these is the purchase of investment property within an SMSF. Whilst a structure can be set up to purchase almost any investment property within a fund, purchasing the office, warehouse or factory that your trading business operates out of may have flow on benefits of diverting rents to your super fund in a beneficial tax structure.
The structures and SIS Act (1993) compliance requirements of SMSF lending are complex, and involve a non-recourse loan. Because of this, several major banks have removed themselves from the space, however there are a great deal of small and medium sized lenders who specialise in helping you leverage you SMSF for investment. If you’d like to explore your options please get in touch.
