Client Problem
Due to the lack of sufficient space in one of our client’s businesses, they decided they needed new larger premises. There was some concern among the Directors of the business as to whether they should rent a larger facility or purchase their own facility, either in the company’s name or the Director’s name. They came to tax accountants Sydney, Gotsis Rubic & Barbariol, to consider the options available to them.

Tax Effective Recommendations

In order to reduce their overall tax liability, the Directors followed the tax saving recommendations provided to them by Gotsis Rubic & Barbariol. They created their own Self-Managed Superannuation Fund (SMSF) and sought to acquire a facility that had the space needed for their business.

The Directors took the funds they had in external superannuation funds and rolled them over into the newly created SMSF. By doing so, the SMSF had the funds needed for a deposit to purchase the property needed.

A Custodian Company was created in order to meet the SMSF regulations. This company then acquired the property on behalf of the SMSF.

Real Tax Benefits
Rent is now paid by the parent company into the SMSF (as the beneficial owner of the property). The parent company sees a tax deduction benefit in the rents paid, which is equivalent to a 30 year saving. The SMSF is only taxed at 15% for the rent received; thus there is an immediate 15% tax savings. An additional benefit to this is that it allows the Directors to build up their assets for retirement. As a member of the SMSF, once the Directors reach the age of 60, they are able to make withdrawals from their SMSF, completely tax-free.