For many Australian business owners, having their SMSF own their commercial property can be one of the most powerful long-term wealth strategies available.
In simple terms, your SMSF purchases the property your business operates from, and your business pays market rent to the super fund instead of to a third-party landlord. Overtime this allows you to build retirement wealth within a concessionally taxed super environment while maintaining control over your business premises.
If you’re running a construction company, medical practice, transport business or property development firm with $5M+ turnover, this strategy can shift value from taxable business profits into superannuation in a compliant and tax-effective way.
Let’s break down how it works and whether it’s right for you.
What Is SMSF Commercial Property and Can You Lease It to Your Own Business?
An SMSF can purchase commercial property and lease it to a related business at market value, provided strict Australian Taxation Office (ATO) and Superannuation Industry (Supervision) Act 1993 (SIS Act) requirements are met.
A Self-Managed Super Fund (SMSF) is a private superannuation fund you control as trustee (or director of a corporate trustee). Unlike retail or industry super funds, an SMSF can directly acquire assets including business real property (BRP).
According to the Australian Taxation Office (ATO, 2025), business real property is land and buildings used wholly and exclusively in one or more businesses. This distinction is important because BRP receives specific treatment under the SIS Act.
Importantly, under section 66 of the SIS Act, an SMSF is allowed to acquire BRP from a related party, provided the transaction occurs at market value.
This exception is what allows an SMSF to own the premises your business operates from and lear it back on an arm’s-length basis in a compliant way.
How Does Paying Rent to Yourself Through an SMSF Work?
Your SMSF owns the property. Your business signs a formal lease and pays market rent into the fund.
Here’s the typical structure:
- The SMSF purchases a commercial property (existing or new).
- Your trading entity signs a commercial lease agreement.
- Rent is paid at market rates.
- The SMSF declares rental income.
- The income is taxed at 15% (or 0% in pension phase).
- The business gets a tax deduction for the rent expense.
Why This Matters for Business Owners
Instead of:
- Paying rent to an unrelated landlord
- Missing out on capital growth
- Funding someone else’s retirement
You are:
- Building retirement wealth
- Locking in business premises
- Moving profits into a lower-tax environment
For businesses with strong cash flow, this creates both asset protection and tax efficiency.
What Are the Tax Benefits of SMSF Commercial Property?
Rental income is taxed at 15%, capital gains at 10% (if held >12 months), and potentially 0% in pension phase.
Let’s compare.
| Structure | Rental Income Tax | Capital Gains Tax (CGT) |
| Company | 25–30% | 25–30% |
| Individual | Up to 47% | Discounted marginal rate |
| SMSF (accumulation) | 15% | 10% (after 12 months) |
| SMSF (pension phase) | 0% | 0% |
That differential can significantly improve long-term Return on Investment (ROI).
Furthermore:
- Rent is tax-deductible to your business.
- Contributions to the SMSF may also be deductible (within caps).
- Asset protection improves as superannuation is generally protected from creditors under the Bankruptcy Act 1966.
For medical and construction businesses exposed to risk, that protection is often undervalued.
What Are the Rules You Must Follow?
The lease must be at market value, documented formally, and comply with Superannuation Industry (Supervision) Act rules.
The ATO is strict. You must ensure:
- The property qualifies as business real property.
- The purchase price reflects market value (independent valuation).
- The lease is documented commercially.
- Rent is paid on time.
- The investment aligns with the SMSF investment strategy.
If the rent is under-market or unpaid, the ATO may treat it as a breach.
Additionally, SMSFs can borrow to acquire property using a Limited Recourse Borrowing Arrangement (LRBA). However, lending rules tightened in recent years, and compliance costs must be factored in.
Because of this complexity, specialist accounting advice is critical.
Is SMSF Commercial Property Right for Construction, Medical and Trade Businesses?
SMSF commercial property suits established, profitable businesses with stable cash flow and long-term premises needs.
Construction companies, medical practices, transport operators and manufacturers often operate from the same location for many years. Because their premises are central to operations, owning the property through a SMSF can align business stability with long-term wealth creation.
This strategy works best for businesses with predictable income and long-term plans. Start-ups, rapidly expanding companies or businesses in volatile industries may find superannuation’s long-term structure and property’s illiquidity too restrictive.
What Are the Risks?
Liquidity risk, compliance risk, and concentration risk are the main concerns.
Here are the things you should consider:
1. Liquidity Risk
Superannuation money is locked away. You cannot access it until preservation age.
2. Concentration Risk
If your SMSF holds mostly one property, your retirement savings may lack diversification.
3. Compliance Risk
ATO penalties for breaches can be severe.
4. Property Market Risk
Commercial property values fluctuate.
According to Australian Bureau of Statistics (ABS, 2024), commercial property values vary significantly by region and asset class. Strategic due diligence is essential.
How Do You Set Up an SMSF to Buy Commercial Property?
To set up an SMSF for commercial property, you need to stablish the SMSF, create an investment strategy, secure finance if needed, and complete a compliant purchase.
Steps include:
- Establish SMSF trust and corporate trustee.
- Establish a Bare Trust and corporate trustee (if borrowing in the SMSF).
- Document a compliant investment strategy.
- Roll over existing super or make adequate contributions to fund the purchase and related costs.
- Obtain pre-approval (if borrowing).
- Have an objective and supportable market appraisal prepared to document the rent amount.
- Execute purchase and lease agreement.
For business owners considering this structure, working with experienced SMSF advisers and accountants is essential. You can explore our SMSF advisory services for more information and guidance.
Key Takeaways: SMSF Commercial Property Strategy
- An SMSF can legally purchase and lease commercial property to your own business.
- Rental income is taxed at 15% — or 0% in pension phase. This is generally lower than company or individual tax rates.
- The strategy builds retirement wealth while securing business premises.
- Strict ATO compliance rules apply.
- It suits profitable, stable businesses with long-term premises needs.
Conclusion
For established business owners, paying rent to yourself through SMSF commercial property can be a sophisticated wealth-building strategy. However, it requires precision, compliance and long-term thinking.
If you own your premises or are tired of funding someone else’s retirement, it may be time to explore whether your superannuation could work harder for you.
Speak with Wardle Partners Accountants & Advisors who understands both complex business structures and SMSF compliance before making any decisions.
Frequently Asked Questions
What is business real property in an SMSF?
Business real property is land or buildings used wholly and exclusively in a business. An SMSF can acquire it from a related party at market value.
Can my SMSF buy my existing business premises?
Yes. If it qualifies as business real property and the transaction occurs at market value with proper documentation.
Is rent paid to my SMSF tax deductible?
Yes. Rent paid by your trading entity is generally tax deductible as a business expense.
Can my SMSF borrow to buy commercial property?
Yes, through a Limited Recourse Borrowing Arrangement (LRBA), subject to strict rules and lending conditions.
