Supercharged

Tapping into your superannuation fund could be a smart way to grow your practice right now—but there are a few factors to take into consideration first.

Most people think of superannuation as their nest egg for the future. It's something you deposit money into every month, but don’t touch until retirement. That’s generally how it works with a standard, set-and-forget super fund. If you’re a doctor, dentist or vet with a self-managed super fund (SMSF), however, there may be many more flexible options open to you. Although an SMSF requires work to set up and manage, having one does give you greater control over your investments. You can also put it to work now, rather than simply waiting until you retire. Here’s how …

Taking practice growth to the next level

Most medical professionals know how much goes into building a thriving practice. It takes hard work to engage and nurture a loyal patient base, while broadening the scope of what you offer.

Eventually, a successful practice will reach the point where it’s time to expand and grow. That may involve moving to bigger or more upmarket premises so you can see more patients, offer additional services, raise your fees, attract a different clientele or hire more staff.

Financing the growth of your practice is a common stumbling block. One strategy you may have heard about to achieve this is borrowing through your SMSF. This may be a tax-effective way to purchase your own clinic or rooms, or invest in your practice.

Buying property with your SMSF

If you operate from a physical location, it may make sense to buy your practice through your SMSF and lease the property back to your business - especially, if you plan to stay in those premises for many years to come.

Owning your own premises is an investment in yourself and your business. It also gives you much greater control over an important business asset and offers protection. Once you own the property, you can’t be forced out by a landlord who decides to sell, or increases the rent to a level you can’t afford.

Given many medical professionals stay in the same premises for a long time, buying the property via your SMSF could be a savvy long-term investment. The rental payments you make on the property go back into your SMSF. If these match the loan repayments, you’re essentially creating a savings plan and hopefully a good level of capital growth in the years to come.

The benefits

Investing in commercial property with your SMSF may have significant business advantages, such as:

• Potential tax advantages: Any rental income and capital gain on the sale of the property will only be taxed at the maximum tax rate of 15 per cent
• It may be easier to manage: Property may be simpler to manage than other more volatile investments
• It may free up other capital: Using your SMSF to buy your rooms may leave you with other practice capital to invest in your business
• It may reduce your personal financial risk: Superannuation assets may be secure from creditors if you run into financial trouble, but expert advice on this is essential.

The considerations

SMSFs take some effort to set up and manage. You’ll be responsible for complying with super and tax laws and managing any investments you make. You need to factor in whether you have the time and skills to do this alongside your other commitments. Alternatively, you may need someone to help you with this.

Determining if commercial property ownership makes sense in relation to your business goals is key, as is assessing your purchasing and borrowing capacity. It’s important to factor in all the additional costs that apply when buying property such as valuations, conveyancing fees and stamp duty. Try our stamp duty calculator to work out how much stamp duty you’ll owe with your new property.

There may also be the risk of putting all your SMSF funds into commercial property instead of diversifying with other investments. It might be worth looking into other ways to use your SMSF as well—such as investing in your company or business (known as in-house assets) or investing in a managed fund.

In conclusion

Purchasing commercial property or other assets using your SMSF requires careful consideration, planning and expert advice. There can be significant upsides too, however you’ll want to consider your own personal circumstances and financial position to determine if the benefits outweigh the risks for you. Using your super to finance business assets or grow your practice may make sense now, but you want to ensure that in doing so, it will also leave you in a comfortable position come retirement.

It’s a good idea to talk through all your options with your accountant, lawyer and a financial adviser before making any decisions.

Click here to read about how other professionals have achieved their goals through using finance through their SMSF. Contact one of our financial specialists on 1300 131 141 to discuss the options available to you.

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