While advantages in gearing residential property in a do-it-yourself superannuation fund may be limited, the 2007 decision to allow DIY funds limited recourse borrowing has provided very specific benefits to small business owners.
Prior to this legislation change, many business owners struggled to take advantage of the long-standing special regulatory provisions allowing their DIY fund to own their operating premise.
Unlike normal investors, business owners are exempted from the related party dealing restrictions both in the acquisition and use of real business property acquired by their DIY fund.
Provided the relevant property qualifies as business premises, the fund can acquire it at market value from related parties including existing fund members and subsequently rent the property on a commercial basis to a business associated with those parties.
Previously, the challenge was to ensure that the DIY fund itself was not associated with any debt attached to the property.
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