Buying commercial property through a self-managed super fund has long been popular with business owners and investors. It can deliver steady income into super, and in some cases lets you own the premises your business runs from. In 2026 it has also become the main way an SMSF can still borrow to buy property.
This guide covers how it works, what changed this year, and the property risks that matter most when the asset sits inside your super. We handle the property side of SMSF purchases. We are not licensed to give financial or tax advice, so the fund and tax side is a job for your accountant and financial adviser.
What changed in August 2026
From 10 August 2026, an SMSF can only use a new limited recourse borrowing arrangement (LRBA) to buy real property if the property is business real property. Existing LRBAs, refinancing of existing LRBAs, and binding contracts exchanged before 10 August 2026 are not affected.
In practice, if your fund wants to borrow to buy property from here, commercial premises used in a business are now the main option. We expect that to bring more SMSF buyers into the market for smaller commercial assets, such as strata offices, medical suites and industrial units, which are the price points most funds can reach.
What counts as business real property
The ATO defines business real property as land and buildings used wholly and exclusively in a business. A few points catch buyers out:
- Commercial zoning alone does not make a property business real property. It is the use that counts.
- A mixed-use building with a residential component may not qualify.
- The use needs to hold for as long as the fund relies on it, so a change of tenant or use matters.
Typical examples are a warehouse leased to a logistics business, a medical or dental suite, a shopfront, or an office used by a trading business.
Buying your own business premises through your SMSF
This is the arrangement many business owners are interested in. Normally an SMSF cannot buy assets from a related party, such as a member or a member’s business. Business real property is an exception. The fund can buy it from a related party at market value, and lease it to a related party on arm’s length terms at market rent.
That lease is also excluded from the in-house asset rules, which otherwise cap assets involving related parties at 5 per cent of the fund’s value. It is why an SMSF can own your premises outright and lease them back to your business.
The arrangement has to be run properly:
- Get an independent valuation for the purchase price and the rent.
- Put a written lease in place on commercial terms, and review the rent in line with the market.
- Make sure the rent is actually paid, on time.
Income from arrangements that are not at arm’s length can be taxed at 45 per cent, so this is not an area to be casual about.
Borrowing: how an LRBA works
Under an LRBA, the property is held in a separate holding trust until the loan is repaid. The lender’s recourse is limited to that property, so the fund’s other assets are protected if something goes wrong.
- The loan must be for a single asset. Borrowed money can generally be used for repairs and maintenance, but not to improve the property or change it into a different asset.
- Fewer major banks now lend to SMSFs. Much of this lending comes from specialist and non-bank lenders, and deposit requirements are often higher than for a standard commercial loan. Talk to a broker early.
- If a related party lends to the fund, the ATO publishes safe harbour terms. For 2026-27 the safe harbour interest rate for real property is 9.35 per cent.
How the tax works
- Rental income is generally taxed at 15 per cent while members are in accumulation phase.
- Income supporting members in the retirement phase is generally tax free, subject to the transfer balance cap of $2.1 million for 2026-27.
- Capital gains on assets held for more than 12 months receive a one-third discount, an effective rate of 10 per cent in accumulation.
- From 1 July 2026, members with a total super balance above $3 million pay additional tax under Division 296 on the share of earnings above that level, with a further rate above $10 million.
How these apply depends on your fund and its members, so this is a conversation for your accountant before you buy.
Victorian costs to plan for
- Stamp duty or CIPT. Under Victoria’s commercial and industrial property tax reform, a qualifying property pays duty on its first sale on or after 1 July 2024. It then moves to an annual tax of 1 per cent of land value 10 years later, and later sales pay no duty.
- Land tax. Commercial property held in an SMSF is subject to land tax. The rules for trusts are specific, so check your fund’s position with your accountant and the State Revenue Office.
- Purchase costs. Legal fees, valuation, building reports, loan costs and buyers agent fees. Our guide to commercial buyers agent fees covers what to expect.
Contributions and cash flow
For 2026-27, the concessional contributions cap is $32,500 and the non-concessional cap is $130,000. Those caps limit how quickly a fund can build a deposit or top up cash if a tenant leaves.
The fund needs enough liquidity to cover loan repayments, outgoings during a vacancy, and pension payments if members are drawing down. A property that looks affordable on day one can strain a fund with thin cash reserves.
The property risks that matter most in an SMSF
- Concentration. One commercial property can be most of a fund’s assets. Your investment strategy needs to account for that.
- Liquidity. Commercial property can take months to sell. If members need to start pensions or leave the fund, a single illiquid asset is a problem.
- Vacancy. Commercial vacancies can run longer than residential ones, and there is no rent while the fund keeps paying outgoings.
- Tenant and lease. The tenant’s covenant, the lease term and how it lines up with your retirement timeline matter as much as the building.
- Resale depth. Small strata offices and suites in the wrong pocket can be hard to sell. Location and scarcity drive liquidity.
Our guides to the types of commercial property and buying commercial property in Melbourne go into how to assess each of these.
Where a buyers agent fits
An SMSF purchase has more people involved than most: your accountant, financial adviser, lender, solicitor and the fund’s trustees. A buyers agent handles the property side and keeps it moving:
- Setting a brief that matches the fund’s investment strategy
- Searching on and off-market for assets that suit an SMSF
- Checking the use supports business real property treatment
- Assessing the lease, tenant covenant, outgoings and zoning
- Negotiating the price and managing the purchase to settlement
If you are considering a commercial purchase through your super in inner Melbourne, our commercial buyers agent service explains how we work alongside your adviser and accountant.
Frequently asked questions
Can my SMSF buy commercial property?
Yes. An SMSF can buy commercial property if the purchase meets the sole purpose test, is made at market value on arm’s length terms, and fits the fund’s written investment strategy.
Can my SMSF buy my business premises?
Yes, if the property is business real property, meaning land and buildings used wholly and exclusively in a business. The fund can buy it from you or a related party at market value and lease it back to your business at market rent on commercial terms.
Can an SMSF still borrow to buy property after August 2026?
From 10 August 2026, a new limited recourse borrowing arrangement can only be used to buy real property if it is business real property. Existing arrangements, refinancing of them, and binding contracts exchanged before that date are not affected.
Can my SMSF buy residential property?
Yes, but it cannot be bought from a related party, and it cannot be lived in or rented by fund members or their relatives. A fund also can no longer take out a new limited recourse loan to buy it.
What tax does an SMSF pay on commercial rent?
Rental income is generally taxed at 15 per cent while members are in accumulation phase. Income supporting members in the retirement phase is generally tax free. Your accountant can confirm how it applies to your fund.
This article is general information, not financial, tax or legal advice. LP Advisory is not licensed to give financial or tax advice. Rules and thresholds are current at the time of writing and can change. Speak to your accountant, a licensed financial adviser and the State Revenue Office about your own situation.
