Exiting your business is a major event. Your business is your baby. You have nurtured it, built it up, ridden the ups and downs. And now, just like when a child leaves home, you need to let go and set it free… albeit with a very nice looking number in your bank account.
Having the proceeds in the bank from the sale of your business is fantastic. However, it’s often just the start of what to do when you exit your business. The money alone may be enough to provide you with financial freedom, but you can also use this cash to buy assets that provide you with income. You can use the proceeds from the sale to buy assets that produce income perhaps even above what you need to live a financially free life.
Now, where could I find a good property to buy?
The good news is, now that you have sold your business, you might know of a commercial property that produces good income. In fact, you might actually know how much income that property is producing – because your business used to pay that income in rent. Yes, purchasing the premises of the business that you have just sold in one of the best strategies available to Baby Boomer business owners in Australia.
Not only do you get to use the proceeds from the salar of your business, but you can also use another asset that, if you have read previous articles, should be quite large when you sell your business: Your Superannuation Fund. We’ve already mentioned this strategy earlier in the book. (It’s important to note that to undertake this strategy, you need your own Superannuation fund, otherwise known as a self managed superannuation fund or SMSF. Just keep that in mind when you read the details below).
Using this strategy when you have just sold your business provides you with not only the advantages of purchasing a solid asset, but some amazing tax benefits. Without going into too much detail on tax, let me share with you the two biggest advantages of purchasing the businesses premises using your superannuation fund:
- You potentially reduce your capital gain from the sale of your business
- The income received from the property is taxed at a lower rate
Please keep in mind that superannuation and related tax laws can be complicated, so it’s wise to get some advice from your accountant before undertaking these strategies to make sure they are right for you. The information above is intended as general information only for the purposes of illustrating the benefits of this strategy.
In part 2, we will delve deeper into this strategy and give you a real life case study of the benefits of purchasing your business premises following the sale of your business.