Funds in a super account are preserved until the member meets ‘a condition of release.’ These conditions include retirement, pre-retirement for those over 55 and still working, death and total and permanent disability. This legal definition is limiting, and for good reason, as superannuation is primarily designed for retirement purposes.
What isn’t well know is that funds can be withdrawn when a super fund purchases real business property from a member or related party. In this strategy the asset is sold to the fund and the fund compensates the seller for the purchase price. Even if the fund doesn’t have enough money to purchase100% of the asset, there’s an opportunity to borrow through several different borrowing arrangements. This is a specialised strategy and it is best to get professional advice from a financial adviser who works in this field.
Like any great strategy, there will be a number of factors to consider before going down this path. On the sale of property assets capital gains tax may apply to the seller and the fund would need to pay stamp duty on the purchase.
This strategy, for example, can be a bonus for farmers who are happy to have a portion of their farm land held in the superannuation environment especially if capital gains tax either doesn’t apply or can be discounted. The advantage of this strategy is that the funds paid to the seller can be used for other purposes such as to reduce debt, help develop their business or for personal use.
Of course this strategy only applies to self managed super funds which have greater flexibility with the investments they can own.