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Can your business rent its premises from your SMSF?
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Overview
Your clinic or workshop may be able to rent premises from your SMSF. Check how the property is used, establish market rent and put the lease terms in writing.
Check how the property is used
A dentist owns a practice through a company. Her self-managed super fund owns the rooms. Can the company pay rent to the fund? It can be possible where the premises qualify as business real property and the arrangement meets the super rules. The business and fund need to deal with each other on commercial terms, even when the same people sit on both sides.
Business real property generally involves land or buildings used wholly and exclusively in one or more businesses. Check actual use, including storage, spare rooms and any private use. A commercial address or a sign on the door doesn’t answer the question. Buying a property from a related party also has separate acquisition conditions, including market value where the exception applies.
Agree the rent before the first payment
Get evidence of market rent for comparable premises. Consider floor area, fit-out, parking, lease term and which party pays outgoings. Have a proper lease drawn up and record rent reviews as they fall due. Set up payments between the business and fund bank accounts so the amount and timing can be checked later.
Now imagine the practice loses revenue and asks for three rent-free months. Treat that as a fresh decision. What would an independent landlord accept in the same market? Get advice, document the commercial basis for any change and consider whether the fund could still meet its own bills.
