Self-Managed Superannuation Funds (SMSFs) have become a popular investment vehicle in Australia, offering individuals greater control over their retirement savings. One intriguing avenue for SMSF investment is purchasing medical rooms. Not only does this provide a stable income stream, but it also allows healthcare professionals to secure their own practice premises. In this blog, we will explore the benefits and considerations of buying medical rooms using SMSF, highlighting the potential financial advantages and the essential factors to keep in mind.
Building wealth through rental income
One of the primary benefits of acquiring medical rooms through an SMSF is the opportunity for rental income. Healthcare professionals typically require dedicated premises for their practice, making medical rooms a sought-after commodity. By owning the premises and leasing them to practitioners, SMSF trustees can secure a reliable income stream to fund their retirement.
Furthermore, medical professionals often have long-term tenancy needs, providing stability and reducing the risk of frequent vacancies. This stable rental income can contribute significantly to building wealth within the SMSF.
Capital growth and property appreciation
Investing in medical rooms through an SMSF offers the potential for capital growth and property value-add appreciation. The demand for medical spaces remains robust, driven by factors such as population growth, increased healthcare needs, and government policies. Consequently, the value of well-located medical rooms is likely to appreciate over time, further enhancing the SMSF’s investment returns. Additionally, investing in physical assets like medical rooms can serve as a hedge against inflation. As the value of the property increases, so does the overall wealth of the SMSF, providing a solid foundation for retirement planning.
Tax advantages and SMSF structure
SMSFs offer various tax advantages when purchasing and owning medical rooms. Firstly, rental income received by the SMSF is generally taxed at the concessional superannuation rate of 15%, which can be significantly lower than personal tax rates. This tax efficiency enhances the growth of the SMSF’s funds and accelerates wealth accumulation. Second, capital gains tax is discounted inside superannuation also, therefore reducing the future tax liability on the capital gains. Finally, SMSFs can claim deductions for expenses related to the medical rooms, such as interest payments on loans, property management fees, and maintenance costs. These deductions help reduce the taxable income of the SMSF, further optimising its financial position.
It is crucial however, to adhere to the strict regulatory requirements governing SMSFs, including sole purpose tests and compliance with the Superannuation Industry (Supervision) Act 1993. Engaging professional advice from SMSF specialists and accountants is essential to ensure compliance and maximise the tax benefits available.
Investing in medical rooms through an SMSF presents a unique opportunity for healthcare professionals and SMSF trustees alike. The potential for stable rental income, capital growth, and tax advantages make this an attractive long-term investment strategy. However, it is vital to conduct thorough research, seek professional advice, and ensure compliance with regulatory requirements.
By leveraging the benefits of an SMSF, individuals can secure their own medical practice premises, build wealth, and enjoy greater flexibility and control over their retirement savings. Remember to weigh the risks, diversify your SMSF investments, and develop a well-defined investment strategy to optimise the financial benefits of owning medical rooms using SMSF.
Join our next knowledge share webinar on buying medical rooms
For more information on planning for the successful purchase of medical rooms, please join Walshs Managing Director, Simon Farmer and Barram Medical Property Advisory’s Director Richard Barram for their webinar event on 2 November 2023, register HERE to watch and receive your copy by email. Topics covered will include funding and debt considerations (where the SMSF option will be discussed), location and site search, negotiation and due diligence, fit out and market trends. Alternatively, please contact Walshs on 07 3221 5677, email@example.com or book a meeting here to further discuss with our expert team if this path is for you.
By Peter Hodgson, Director | Walshs Financial Planning