Client Problem

Our client was expanding their operations and approached Gotsis Rubic & Barbariol for advice. Their present location didn’t have enough space to accommodate the expansion. The Directors were faced with renting out a larger space or considering the purchase of new premises to accommodate the company growth. The problem was knowing which was the best option, renting a larger place or purchasing and if purchasing should it be in the name of the company or of the Directors.

Tax Effective Recommendations

In order to reduce their tax liability, the client, based on the tax advice they were given by Gotsis Rubic & Barbariol decided to create a Self-Managed Superannuation Fund or SMSF. This allowed the Directors to acquire premises with sufficient space for their operations.

By rolling over funds from their external superannuation fund, the Directors had enough funds in the new SMSF for a deposit to buy a suitable property.

The Custodian Company acquired the property on behalf of the SMSF, to comply with SMSF regulations.

Real Tax Benefits

Not only can the Directors build up retirement assets, but they enjoy an immediate 15% tax savings. The beneficial owner of the property is the SMSF and the family company now pays rent into the SMSF and it is only subject to a 15% tax rate. The rent paid is tax deductible to the family company amounting to a 30 year savings. As members of the SMSF, the Directors may withdraw funds from their SMSF after the age of 60, and have no tax liability.