Sargent Baldwin Lawyers assist its clients to maximise the value of their commercial property investments. Commercial property can be complex and it is imperative that you have a strong team around you such as your lawyer, accountant and financial planner to ensure that you have a good understanding of the investment, its potential capital growth, taxation benefits, tenancy risk and on costs of holding certain types of property. We work with you and the other members of your property team with a view of adding value to that property through sound legal tenancy and risk advice.
Commercial property is a large part of our business and we deal with many types of investors including:
- Small to large developers;
- Experienced commercial property investors;
- first time investors – including those buying their own premises from which they operate their business;
- Self-managed super investors.
The following questions are the most commonly asked by our clients when considering purchasing their business premises.
The benefits are many but vary depending on your personal circumstances. In general terms however, the following benefits apply:
- Security of tenure and protection of your position/goodwill – as a tenant you have no control over your landlord developing the premises or not granting a new lease.
- Wealth creation – you pay rent to your own entity.
- Tax benefits – you may be able to reduce capital gains tax by using one of the 4 small business concessions:
- 15 year exemption – if your business has owned the premises for 15 years or more and you are 55 or over and are retiring, or are permanently incapacitated, you won’t have an accessible capital gain when you sell.
- 50% active asset reduction – you can reduce the capital gain on the premises by 50%.
- Retirement exemption – capital gains from the sale of the premises are generally exempt to a lifetime limit of $500,000. If you are under 55, the exempt amount must be paid into a complying superannuation fund or retirement savings account.
- Roll-over – you can defer your capital gain until another event happens that crystallises that gain.
If you were to purchase an alternate investment property that you or one of your entities do not tenant, you will incur capital gains tax upon sale. We work with your financial planner/accountant to ensure that you receive the appropriate financial/accounting advice to ensure the benefits of owning your business premises are maximised.
There are a number of options that can be utilised but will depend on your current financial position and retirement planning. It is important to get the structure correct prior to entering into a contract to ensure asset protection measures and taxation benefits are maximised. There are numerous entities such as a discretionary trust with corporate trustee, unit trust with corporate trustee, partnership, and self-managed superannuation funds. Other factors that may influence your decision are whether or not borrowing is required, set up costs and compliance costs. We are happy to work with you to discuss this matter in detail prior to enter into a contract to purchase commercial premises.
If you are considering purchasing through self-managed super there are a number of requirements that must be met particularly if you intend to borrow. Borrowing requires the establishment of a custody/holding trust and there are strict rules in making improvements, payment of the deposit and eventual transfer. We have many years of experience in this area and are happy to discuss this matter further with you.
There are a number of ATO rulings which examine whether or not a property may be sold as a “going concern” and therefore GST free. In essence, the sale of a property may be awarded “going concern” status where a continued enterprise of leasing has taken place prior to the contract date. Determining factors include the status of the seller, whether there is a lease in place prior to the settlement date, the purchasers entity (as opposed to the tenant entity) and whether the parties are registered for GST.
Other costs that should be considered when entering into the purchase of commercial property include transfer duty, entity establishment and compliance costs, bank fees and professional fees including lawyers and accountant/financial planners fees.