You may be confident that you have a well-planned exit strategy for your business when you retire, but things don’t always go to plan. This is where having a decent amount built up in your super as a safety net can help.

Why consider an SMSF? 

Having control over your investments is a big drawcard of a self-managed super funds (SMSFs), and for small business owners in particular, as you can lease a commercial property owned by your SMSF back to your business provided the lease arrangement is on full commercial terms.  

Owning commercial property

According to Craig Day, Colonial First State’s Executive Manager, Technical Services, this is a common strategy for small business owners, “You’ve got control over an important business asset, which can help reduce the risk of something happening to force you out of business premises, plus there may be some tax advantages available,” Day said.

This is because your business can claim a tax deduction for the rent it pays given it’s a business expense. And if a commercial property is held within an SMSF, the fund only pays 15% tax on the rent earned.

Any future capital growth would also be taxed on a concessional basis.

Rent paid by the business owner (and any other commercial tenants) into the SMSF also helps to grow retirement wealth. SMSFs allow further advantages through pooling of multiple trustee contributions and balances.

Things to watch out for

It’s important to get the intricacies right in these sorts of arrangements, particularly if your SMSF is borrowing to purchase property. And you’ll also need to decide if buying commercial property fits with your investment strategy.

“The possible downside of this approach is not thinking objectively about what the fund is there for and placing high concentrations of money from that super fund in particular assets without thinking about the need to diversify the portfolio for retirement,” says Marcus Evans, Commonwealth Bank’s head of SMSF customers.

“Ultimately, your SMSF is there to build your retirement wealth, not just help the business over a short period, so a long term objective looking towards diversification of the superannuation fund and its assets is important.”

As with any property investment there’s also no guarantee that it will increase in market value or be easy to sell.

Other ways small business owners can use an SMSF

Commercial property investment is just one method some small business owners use in wealth creation.

Beyond that, the flexibility available to SMSFs can also be an advantage in terms of being able to act on a particular market view.

SMSFs can also invest a small amount of the super fund back into a company or business.

“They’re called in-house assets and are restricted to no more than 5% of the total value of the assets of the super fund,” says Day.

However, he warns that in-house assets can be complex and result in a fund’s risk level being pushed higher as the chance of an SMSF breaching regulations generally rises with added complexity. He also stresses that it’s important to consider how well this kind of investment would meet the future retirement needs of members.

“Investments need to be sound and should be focused on providing retirement benefits”, Day said. “These measures aren’t about providing capital to a small business when it is not in the interests of the super fund.”

Running a small business carries risks and often business borrowings are secured against the family home. Assets held within superannuation grant some significant asset protection features that may be worth considering. For example on bankruptcy, the bankrupt’s superannuation interests are generally protected from creditors with the exception of transactions made with intent to defeat creditors.


Importantly many business owners have a significant proportion of their wealth tied up in their business and property. An SMSF can help diversify their assets to lower the risk of having all their “eggs in one basket” by investing in domestic and international equities either directly or through ETFs or managed funds.

Getting some advice

Before making the plunge into SMSFs it’s important to get some advice from an SMSF accredited adviser to explain the pros and cons of running your own fund. It’s more work than having someone else manage your investments and sometimes the self-directed option just doesn’t fit your lifestyle. For some, the time constraints of running your own business may make staying on top of requirements difficult.

For others it’s worth the extra efforts to open up a range of opportunities that can come with running their own fund.

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Things you should know

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice.

Taxation considerations are general and based on present taxation laws and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information.

Commonwealth Bank is also not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.

While potential SMSF investments have been illustrated within this content they do not represent a comprehensive suite of possible investment products and services within the guidelines pursuant to the SIS Act 1993 with ATO oversight.