Can I use my SMSF to invest funds into my own business?

Hi Megan, best to check with your Accountant/financial advisor but there are regulations around using SMSF funds to invest/loan to related entities. I'm no expert, nor am I a qualified financial planner, but if memory serves me correctly, it's something like the SMSF can't invest/loan anymore than 20% (??) of it's total funds to a related party. If you keep Googling you'd probably find more on it as well. Cheers

Hi Megan,
Great question. I am not a financial planner but have many clients ask this question and the financial planners we work with seem to come back with the same response.
You could use a SMSF to purchase the premises that the property operates from. This is not technically investing in your own business but can help provide somewhere for the business to operate from. You need to be aware of the rules around ensuring the relationship is commercial but there can be some flexibility that may not be available were you to rent a premises.
If you want to invest in the business directly there are several rules you need to be aware of.
Firstly the in house asset rule which limits you to 5% of the funds directly invested in an asset controlled by a member.
So if you have $100,000 in the fund you can only use $5,000 for the business.
Keep in mind that control is considered having more than 50% ownership so the only way around this is having several business partners, and personally if you are in business with 3 or more people it gets more and more complex. So you would need to seriously consider the options.
The other thing that you need to keep in mind is that as the SMSF trustee you need to be acting within the guidelines of the sole purpose test which require the super fund to invest its monies for the express purpose of providing retirement benefits for members. Investing ins a business with 3 or more partners may not meet this definition.
Given there are several small business lenders in the market it is probably worth considering these before putting your "life savings" at risk.
Hope this helps

Hey Megan,

Great responses above. A couple of points to clarify:

1. Albert is correct, you could purchase business premises and rent these back to your company
2. If it's capital into the actual business - there are a number of matters to consider:
(a) In-house asset rule is limited as Albert mentions to 5% - it's important to think about how your business is valued - if for instance your accountants re value your business each year it could exceed the 5% (ie start with a value of $1m and invest $50K, then business value increases to $2m, you're immediately double the 5% max);
(b) secondly for in-house asset test we typically use the ASIC/ATO definition of a widely held company, being one with more than 50 members.

Essentially the reason for the restriction on investing in your own business or for that matter operating any business from a SMSF is to keep out tax dollars flowing through to the folk in Canberra. Given a SMSF is taxed at 15% on earnings, the Treasurer would loose the other 15% they charge to bring company tax up to 30%.

Hope the above helps clarify.