Case Study: Self-Managed Super Fund to Minimise Tax

November 01, 2009

Client Problem
Our client was expanding and their existing premises did not have sufficient space for its operations. The Directors were considering whether to rent out larger premises or buy new premises either in the company’s name or in the Director’s name. They approached us to consider these and other options.
Tax Effective Recommendations

Following the tax advice provided by Gotsis Accounting, the Directors agreed to acquire premises with sufficient space for their operations and to create their own Self-Managed Superannuation Fund (SMSF) in order to reduce their overall tax liability.

The Directors rolled over funds they had in external superannuation funds into the newly created SMSF. Their SMSF now had enough funds for a deposit to buy a suitable property.

In order to meet the SMSF regulations, they created a Custodian Company which acquired the property on behalf of the SMSF.
Real Tax Benefits
The family company now pays rent into the SMSF (as beneficial owner of the property). The rent paid is tax deductible to the family company which is equivalent to a 30 year saving. The rent received by the SMSF is taxed at 15% only, thus there is an immediate 15% tax saving. This also enables the Directors to build-up their assets for retirement. When the Directors reach the age of 60, as members of the SMSF, they may withdraw, absolutely tax free, funds from their SMSF.