Many business owners explore whether a Self-Managed Super Fund (SMSF) can purchase business equipment—such as vehicles, machinery, or tools—and lease it back to their own business. While this may sound like a smart tax and cash flow strategy, the rules around SMSFs make this difficult in practice.
Under current superannuation regulations, an SMSF is generally not allowed to lease assets to a related party. This restriction is part of the in-house asset rules, which are designed to ensure that retirement savings are kept separate from personal or business use.
There is an exception for business real property, such as commercial buildings used entirely for business purposes. However, equipment does not qualify as business real property, so it does not benefit from this exemption.
If an SMSF does lease equipment to a related party, it will usually be treated as an in-house asset. SMSFs are limited to holding no more than 5% of their total fund assets in in-house assets. This threshold can be exceeded quickly, especially with high-value equipment, leading to compliance breaches and potential penalties.
The only scenario where this type of arrangement may be possible is where the business leasing the equipment is not owned or controlled by the SMSF member or their associates. In that case, the lease may not be classified as a related-party transaction.
Given the complexity and risks involved, it’s important to get the structure right from the start.
Need advice on SMSF strategies?
Contact iCare Super to discuss your situation and ensure your fund remains compliant while working towards your long-term financial goals.
