Changes to SME Finance

The changes to superannuation over the past two years have created an exciting opportunity for SME owners, even those nowhere near retirement age, giving them the ability to use their super to grow their business, control their premises and provide for a comfortable retirement all at the same time.

Recent changes relevant to SMEs include limitless tax-free retirement income and lump sums from age 60, and the availability of borrowing for assets other than shares.

Taken together, these changes mean that in many cases, the business owner’s super fund has become the asset ownership vehicle of choice, replacing the family trust traditionally favoured by accountants. This allows SME owners to:

·           Access super savings to fund the deposit with the balance being borrowed. This preserves cash outside super for investment in the business and means that the rent paid by the business is funding the owner’s retirement, not someone else’s.

·           Provide for succession planning, allowing an owner to free up the cash tied up in the existing business premises to fund a comfortable retirement whilst retaining control over the premises for use by the next generation. In effect, this is turning tax-deductible rent into tax-free retirement income.

Both these opportunities can provide an enormous boost to the finances of business owners by allowing them to access cash they didn’t think they could, plus get the benefits of gearing, which can deliver significant tax benefits. Even better, there are no intrusive credit checks and no mountain of paperwork or personal guarantees to provide. The property itself is the only security required.

Things to think about when selecting a superannuation loan provider

•    Are there any personal guarantees required?

•    Does the lender interpose another entity between it and your superfund, which is being asked to provide guarantees?

•    Are there very high set-up costs? If they are charging more than 2.5 percent it is too much.

•    Are they also selling property or taking commission on the property you buy?

•    Can you choose your own property manager or manage the property yourself?

•    Can you use your own trustee?

Vince Scully is CEO of Calliva Group

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