Quick answer
A self-managed super fund can own commercial premises and lease them to the member's business at market rent, because business real property is a permitted exception to the related-party rules. Since 10 August 2026, a fund can only use a limited recourse borrowing arrangement to buy property that qualifies as business real property, so residential borrowing is closed and commercial premises remain available.
Key points
- Business real property, meaning property used wholly and exclusively in a business, can be bought by an SMSF and leased to a member's business
- From 10 August 2026, new SMSF borrowing on property is limited to business real property; earlier arrangements and their refinances are carved out
- Rent must be at market rate, documented and actually paid on time, or the fund risks breaching the rules
- A borrowing fund uses a single-asset structure with limited recourse, which affects deposit, guarantees and lender choice
- SMSF lenders typically want larger deposits than ordinary commercial buyers, so test the numbers before bidding
For years, the neat idea behind SMSF property was simple: the business owner’s super fund buys the building, the business pays it rent, and that rent goes into the member’s retirement savings rather than to a landlord. It still works. What changed on 10 August 2026 is who can borrow to do it, and the new line is drawn around exactly the kind of building a business owner wants.
This guide explains how SMSFs and business premises fit together, what the 2026 change means, and where finance fits in.
What is business real property, and why does it matter?
Business real property is, broadly, land and buildings used wholly and exclusively in one or more businesses: a workshop, a medical suite, a warehouse, a shopfront, an office. Two features make it special for super.
First, an SMSF is normally not allowed to buy assets from a related party, and a business run by the member is a related party. Business real property is a long-standing exception, so a member can sell their premises to the fund, or the fund can buy a building and lease it back to the member’s business.
Second, from 10 August 2026 it is also the only kind of real property a fund can buy using a new limited recourse borrowing arrangement (LRBA). The ATO says the change came from the Treasury Laws Amendment (Tax Reform No. 1) Act 2026. Residential property is no longer eligible for new LRBAs.
A mixed building is the grey area. A shop with a flat above it is not obviously “wholly and exclusively” used in a business, and commentary in 2026 reports that lenders are declining anything with a residential component. Ask both your adviser and the lender how they classify a mixed-use building before you spend money on it.
What did the 10 August 2026 change do?
According to ATO guidance, the restriction applies to LRBAs entered into on or after 10 August 2026. The ATO says the following are unaffected:
- LRBAs entered into before that date
- refinancing of those earlier LRBAs
- binding contracts to acquire real property exchanged before that date, even if settlement or the LRBA comes later
The ATO also says it doesn’t matter who the lender is. The rules apply where the arrangement is an LRBA, whether the lender is a bank, a non-bank or a related party.
The test is applied when the arrangement is entered. Temporary vacancy does not by itself break the test, but if the owner abandons plans to lease or use the property for business, it stops qualifying. That makes the intention at the start and the paper trail around it important.
How does an SMSF actually buy and finance a building?
A fund can buy outright with its own cash, or borrow. If it borrows, the structure is tightly prescribed:
- A single acquirable asset. The loan buys one property, or one set of identical assets under a single title.
- A holding trust. The asset is held on trust for the fund, and legal title transfers only when the loan is repaid.
- Limited recourse. If the fund defaults, the lender’s claim is limited to that asset and not the fund’s other investments. In practice lenders often ask for personal guarantees from the members to offset that, and our glossary entry on personal guarantees explains the exposure.
- No improvements from borrowed money. Borrowed money can buy the asset and fund repairs and maintenance, but not improvements that change its character.
Lenders in this niche usually set tougher terms than an ordinary commercial loan. One published 2026 lender listing quoted lending up to 75% of value over up to 30 years, and brokers describe deposits in the 30% to 40% range as common, with the fund needing a cash buffer on top. Treat those as indicative only and confirm directly. Pricing is also higher than ordinary owner-occupier lending, which is why the maths needs checking before you bid.
What does a worked example look like?
Illustrative only. Two members of a Melbourne physiotherapy practice have a combined SMSF balance of $900k and want to buy $1.1m consulting rooms, then lease them to the practice.
| Item | Amount |
|---|---|
| Purchase price | $1,100,000 |
| Lending limit used (example) | 70% |
| Maximum loan | $770,000 |
| Deposit needed | $330,000 |
| Stamp duty, legals and fees (example allowance) | $60,000 |
| Cash needed from the fund | $390,000 |
| Fund balance after settlement | About $510,000 |
The rent the practice pays, at a documented market level, services the loan plus costs. If the practice has a quiet quarter, the fund still has to meet repayments, so liquidity matters. A lender will check that the fund isn’t left with only the building.
You can sanity-check different values in the LVR calculator.
What are the rules around rent and the lease?
This is where well-meaning funds trip up.
- Market rent. The rent should be what an independent landlord would reasonably charge. Keep an agent’s letter or valuation on file.
- Written lease. A proper commercial lease, signed before occupation, not a handshake.
- Pay on time. Arrears owed to the fund from a related business can look like a loan to a member, which is a problem.
- Keep the business and the fund separate. Outgoings, insurance and repairs need to be allocated according to the lease, and the fund pays what the owner pays.
- Record keeping. Minutes, invoices and bank records need to line up with the lease.
The building is a fund asset. Members can’t use it for private purposes, and they can’t use a fund property as security for personal borrowing.
How does this compare with buying through a company?
Buying personally or through a company or trust has no super rules but also no concessional tax environment on rent and gains. An SMSF has restrictions on borrowing, access to the money and day-to-day mixing of personal and fund affairs. We compare them in SMSF vs company purchase of commercial property, and cover the lending product in SMSF commercial property loans.
If your question is wider, namely whether to own at all, see buying your premises vs leasing.
When is an SMSF the wrong tool?
- The fund’s balance is small relative to the building, leaving no liquidity.
- You may need the capital in the business within a few years. Super is locked until a condition of release is met.
- The building is mixed-use or unlikely to meet the business real property test.
- You’d need to pour improvement costs into it from borrowed money.
- Members are not aligned on retirement timing or on the fund’s investment strategy.
Super is a long game. If the business needs the cash sooner, a standard commercial property loan in the business’s own structure may fit better. A bank can still be a strong first call on that route.
What if the business needs finance around the property?
The fund’s property purchase and the business’s cash needs are different problems. The business might still need working capital after a move, equipment, or a short-term bridge if settlement and a sale overlap. Those are borrowings of the operating business, not the fund, and they have to stay separate. If you’re unsure which side a cost belongs to, ask your accountant first.
Separate the property from the cash-flow question
An SMSF purchase should be decided with your accountant or SMSF specialist, who looks at the fund and its rules. What we can do is help with the business side: the lending around your trading business, whether that is working capital, equipment or property-secured finance for the business itself.
Our enquiry takes about a minute, and enquiring doesn’t touch your credit file. Your details stay with us instead of being passed to lender after lender, and a real person reads your situation before calling you back. Describe the business and what you need the money for as accurately as you can, so the first conversation starts with the right option.
Frequently asked questions
Can my SMSF buy my business premises?
Yes, in general. Business real property is an exception to the usual ban on buying assets from related parties, and the fund can lease it to a related business. The sole purpose test, trust deed, investment strategy and market-rent rules all still apply, so get the structure checked by your SMSF adviser or accountant before signing a contract.
What is business real property?
It is real property used wholly and exclusively in one or more businesses, such as a factory, office, shop or warehouse. The test for new borrowing under the 2026 rules is applied when the borrowing arrangement is entered into, so confirm how a particular building would be classified before you commit.
Can an SMSF still borrow to buy property after 10 August 2026?
For business real property, yes. For residential property, no new limited recourse borrowing arrangements are allowed. Arrangements entered into before that date, their refinances, and contracts exchanged before it are described by the ATO as unaffected.
Does the rent have to be at market rate?
Yes. A lease between the fund and a member's business must be on commercial terms, documented and paid on time. Rent set below market, or arrears allowed to build up, can create compliance problems. A written valuation or agent letter supporting the rent is sensible evidence.
Are SMSF commercial property loans harder to get?
They are specialised. Lenders generally require lower loan-to-value limits than a normal commercial purchase, with a deposit commonly in the 30% to 40% range or higher, and the fund must show enough liquidity to cover repayments and costs. The lender pool is smaller, so shop around.
Can the fund pay for improvements with borrowed money?
Not under a limited recourse borrowing arrangement. Borrowed funds can generally cover acquisition and repairs or maintenance, but not improvements that change the asset's character. Improvements have to be paid from the fund's own cash, so plan the budget for that before settlement.