Buying Commercial Property Through Your SMSF
Written by Kurt Armbruster, Financial Adviser | Last reviewed: 24th September 2026
An SMSF can legally purchase commercial real property, either outright using fund cash reserves or through a Limited Recourse Borrowing Arrangement (LRBA) loan structure. This can be an efficient way to consolidate business and retirement assets. Importantly, an SMSF can lease the property back to your own operating business, provided the rent aligns strictly with independent market rates and the lease agreement is formal and arm’s-length.
The primary tax benefit is that rental income received by the SMSF is taxed at a concessional rate of 15%, whilst capital gains can be significantly reduced or eliminated if sold during the retirement phase. Compliance is stringent: the arrangement must satisfy the “sole purpose test”, and the property must be used wholly and exclusively in one or more businesses. Independent valuations are required to ensure transparency and compliance with SIS Act requirements.
Can an SMSF lease property to my business?
For business owners, acquiring commercial premises through an SMSF provides a dual advantage: securing operational premises for the long term while directing rental payments into their own retirement fund rather than to an external landlord. Because the property is classified as business real property, the fund is permitted to acquire it directly from a related party or lease it back to a related entity.
However, the lease must be governed by commercial terms, complete with formal documentation, regular rent reviews, and strict adherence to payment schedules to ensure full regulatory compliance. If you already own the premises personally, an in-specie transfer may allow the property to move into the fund without a sale on the open market.
Buying SMSF property with a limited recourse borrowing arrangement (LRBA)
When leveraging an LRBA to fund the acquisition, trustees must navigate complex debt structuring rules. Under an LRBA, the property is held in a separate bare trust until the loan is fully repaid, shielding the remaining assets of the SMSF from default risks associated with the property debt.
Due to tighter bank lending restrictions on SMSF loans, borrowing costs and equity contribution demands are often higher than standard commercial mortgages. Trustees must ensure that the fund maintains adequate liquidity to meet interest repayments, property maintenance costs, council rates, and insurance premiums without breaching contribution caps.
Weighing up an SMSF property purchase? Talk to our superannuation advisers about whether your fund has the balance and cash flow to support it.
Exit and succession planning for SMSF property
Additionally, long-term exit and succession planning must be integrated into the property strategy from the outset. If the commercial property represents a concentration of fund assets, trustees must evaluate how liquidity will be managed when members reach retirement age and transition into pension phase.
Strategic considerations around future asset sales, potential capital gains tax exemptions, and transfer mechanisms to the next generation must be carefully weighed alongside experienced financial and legal professionals. For members with balances above $3 million, a large realised gain on sale may also be counted for Division 296 tax.
SMSF commercial property FAQs
Yes, provided the property is business real property, meaning it is used wholly and exclusively in one or more businesses. This is one of the few exceptions to the rule that an SMSF cannot acquire assets from related parties. The purchase must be at market value, supported by an independent valuation, and stamp duty and capital gains tax will usually apply.
An SMSF can buy residential property as an investment, but it cannot be bought from a related party, and members or their relatives cannot live in it or rent it. This is why commercial property is more common in SMSFs owned by business owners, since it can be leased to a related business at market rent.
A limited recourse borrowing arrangement is the only way an SMSF can borrow to buy an asset such as property. The property is held in a separate holding (bare) trust until the loan is repaid. If the loan defaults, the lender can only claim that property, not the other assets of the fund.
Rental income is taxed at 15% while the fund is in accumulation phase. Once members move into retirement phase, income and capital gains on assets supporting retirement phase pensions are generally tax-free, within the limits of the transfer balance cap.
Own your premises and build your super at the same time. Our superannuation advice team can help you test whether an SMSF property strategy stacks up. Book a chat or call 0449 890 302.
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This content is general advice only and does not take into account your personal objectives, financial situation, or needs. Before acting on this information, consider its appropriateness to your circumstances and seek professional financial advice. Authorised Representative of Templestone Financial Services Pty Ltd AFSL No. 523831. Trustee for the Armbruster Family Trust T/A Super Financial Advice.