Can I use my Self-managed Super Fund to Purchase a Business?

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Self-managed Super Fund (SMSF)

A super fund is a trust fund where superannuation or super is allotted into. This super is money regularly deposited or contributed while you are working to someday gain income upon retirement. The more you invest in it, the more benefits you will have when you retire.

The Self-Managed Super Fund (SMSF) is a type of super fund where its members are also considered to be its trustees. They receive the most benefit of the fund while also having authority over those benefits. If you are not sure about it, it is recommended that you consult with an SMSF Accountant for better guidance.

Purchasing a Business through Self-managed Super Fund

Technically, you can purchase and run a business through SMSF by either purchasing it in the form of an investment (buying stocks, shares, etc.) or running it with SMSF as the means. Your SMSF must ensure that the business acquisition complies with all necessary prudential standards for it to remain in compliance with its superannuation fund status.

When that is over, there remain issues you are also required to attend. Some of those issues will be discussed below.

Related Post: Understanding Your SMSF: What Can You Use Your SMSF For?

Other Purchasing Issues

Concessional Tax Treatment

To lessen the risk with that purchase, you should consider having eligibility for SMSF tax concessions or, in other words, concessional tax treatment. To be viable for it, your SMSF must meet the Sole Purpose Test.

True to its name, the test is done to ascertain that the sole purpose of the fund will be the retirement benefits of its members. If the purchase does not align with the Sole Purpose Test requisites, your SMSF could be labelled as a non-complying fund, becoming ineligible for SMSF tax concessions. Going ahead with the purchase through your SMSF while not being eligible for the tax concessions will adversely leave you with a large tax obligation.

Formulated Investment Strategy

Your SMSF is also required to have a formulated investment strategy, and its best interest should be maximising the retirement benefits of its members. All operations and proceeds of the business purchased should be in accord with the decided investment strategy. Should an updated strategy be needed, a quorum of its members needs to be satisfied.

Phil Griffiths

Phil Griffiths

Bachelor of Commerce
Certified Practising Accountant
Diploma in Financial Planning
Professional Certificate in SMSF
Approved SMSF Auditor

Phil has been managing director of Griffiths Advisory since it began 29 years ago. With a wealth of experience in taxation, business advisory, superannuation, negative gearing, and wealth creation.

Phil enjoys a healthy active lifestyle which includes surfing, cycling and snowboarding, as well as spending quality time with his wife and two children.

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