If you own a commercial or residential property in your self managed superannuation fund, you will be collecting rent on a regular basis.
If you have that property being managed by a letting agent you would be aware of what the market rent is on that property and hopefully it's being collected correctly.
But if you are the one collecting the rent and have set the rental rate, have you checked out it if it is a commercial rate?
Let's say you have a commercial property in your super fund that your business is currently the tenant. The first question you need to ask yourself is did you get the lease commercially valued? If not, we highly recommend you organise a commercial valuation on what the lease should be.
Did you actually sign a lease between your business and the super fund? Are you aware of the terms of that lease? For example, what increases to the lease does it factor in; CPI? And if it has this included, are you abiding by the lease conditions?
It's important that these type of arrangements are run on a commercial basis, otherwise they may be deemed to be not in accordance with complying with the SIS regulations.
Is there an amount that is considered too much rent?
Yes. If the commercial rate is say $2000 per month and you have entered a lease to pay $4000 a month, this could be considered special income, and it's not just the excess which is considered special but the whole amount. The taxation consequence of paying double the rent is that the fund will be taxed at 45% rather than the concessional rate of 15%.
What if you fall behind in receiving the rent?
The super fund is required to collect the rent in accordance with the lease agreement. But not every tenant operates within their own commitments and can fall behind in payments.
Like any tenancy arrangement, the super fund needs to do everything it can to collect that rent. If this requires legal action, then it should be taken. Should it then collect back payments of rent in a lump sum, this will not count towards the "double" rent scenario, so no concerns of special income there.
When it comes to dealing with your own business and your own self managed super fund, you need to operate as if it's an arm's length arrangement, and make the payments on time where possible.
If you haven't got a proper lease or commercial arrangement between your tenant and your super fund, we highly recommend you get that organised immediately. Don't be overpaying yourself and make sure you collect the rental increases when they fall due.
