Buying your café premises: How to have your cake and eat it too
14 May 2017
Posted by Equus Partners
As we mentioned in our last blog post, superannuation can be a fantastic asset for café entrepreneurs like you.
One of the keys to growing a business is to use its income to create and buy assets that help generate that income. And a great asset for any business to own is a commercial property such as a factory, office or retail outlet. Not only can they provide great cash flow, they can also provide some fantastic benefits.
My guess is you know of at least one commercial property that generates a great income. In fact, you may know exactly how much income it generates because your business pays it every month.
Buying the premise where your café is located is a great strategy for any café entrepreneur. And chances are you can use your superannuation fund to do it.
If you’re running your own café, or have just sold your business, this strategy gives you not only the benefits of owning a solid asset but also some amazing tax benefits. Here are just two advantages of buying your café’s premises using your superannuation fund.
- You can potentially reduce your Capital Gain Tax when selling your café
Whenever you buy and subsequently sell an asset (such as a business), you want to make a profit. So, you want to sell the asset for more money than you paid for it (or contributed to it while you had it).
When you sell a business in Australia, you can roll over (contribute) some of the money you get from the sale to superannuation. This will in turn reduce the figure used to calculate the ‘sale price’, and can potentially reduce the amount of Capital Gains Tax you need to pay.
- The income you receive from the property is taxed at a lower rate
Having the superannuation fund own the premises your café runs from means the rent your business pays goes into the fund. But as we mentioned in an earlier blog post, superannuation funds in Australia pay only 15% tax on income. This a lot less than individuals pay—up to 49.5%. And the money you save on tax can be used to grow your asset base even more.
Buying your café premises is a great move. It can reduce both the tax you pay now and the Capital Gain Tax you’ll have to pay when selling your business. And the rent your business pays will be going into your pocket rather than someone else’s.
If you’d like to know more about using your superannuation to buy your café premises, get in touch with us today.
And hopefully we can visit your place soon.