What’s driving SME appetite for buying office space are both historically low interest rates – where money is cheap – and reduced concessional superannuation caps as more people attempt to shift funds into the lower taxing superannuation environment.
Much of the whopping 25% jump in the uptake of bank debt recorded within RSM Australia’s thinkBIG survey 2016, may be attributed to an increasing number of SMEs buying their own premises. Having picked up on the rare opportunity of ‘owner-occupying’ being a cheaper option than leasing, more SMEs now favour buying office space, in the name of their self-managed superannuation funds – SMSFs – and leasing back to their business.
What’s driving SME appetite for buying office space are both historically low interest rates – where money is cheap – and reduced concessional superannuation caps as more people attempt to shift funds into the lower taxing superannuation environment.
Cost benefits of ownership versus leasing premises aside, he says the prospect of higher rental yields and stronger capital gains – as demand intensifies – is also making an office a more affordable alternative to a declining residential property market within most Australian capital cities, with provisions governing SMSFs helping to facilitate this outcome.
Interestingly, 40% of SMEs within thinkBIG 2016 – up from 35% last year – are open to potentially using superannuation for their business. Graham says attractive lease-back arrangements available to SMSFs, could help explain why a third of SMEs ranked their satisfaction with superannuation provisions so highly.
It could indicate growing realisation among business owners that superannuation is an effective way to either fund growth or purchase business premises with minimum risk.
For SME owners planning an exit strategy there is the ability for significant amounts from the sale of a small business to go into superannuation, utilising the non-concessional and small business capital gains tax concession limits.
It’s important that SME owners – 38% of whom state they’ll need over $100,000 annually for their retirement – make the most of their superannuation options. We expect more proceeds from business sales to find its way into superannuation.
The limit of $500,000 in after-tax contributions proposed within Federal Budget 2016-17 means some people won’t be able to contribute as much to their superannuation as they might like.
Before the federal budget, the standard cap on non-concessional or after-tax super contributions was $180,000, although it was possible to bring forward up to three years’ worth of contributions, to a total of $540,000.
However, SMEs should remember that some individuals may also be able to receive a double tax deduction for contributions to their SMSF during the month of June if they adopt what’s called a ‘reserving strategy’.
Andrew Graham, National Head of Business Advisory, RSM Australia
