What Counts as Commercial Property for Your SMSF

• Offices, warehouses and industrial units — standard commercial assets, leased to any tenant on arm’s-length terms
• Retail premises — shopfronts, showrooms, and similar
• Business real property — property used wholly and exclusively in a business, which can include premises leased to a fund member’s own business, provided it’s done on strict arm’s-length terms

That last point is worth sitting with for a moment: business real property is one of the few assets your SMSF can acquire from a related party, and one of the few it can lease to one — rules residential property has never allowed. The ATO sets out the exact conditions for this in its guide to SMSF investment restrictions. If you run a business and own the premises it operates from personally, moving that property into your SMSF (or having your SMSF acquire a similar one) is a strategy worth exploring with your adviser.

Why This Matters More Now

With residential leverage off the table for new arrangements, commercial property is where the “power of leverage” still applies inside super. A fund with a 30–35% deposit can still gear into an asset several times the size of that deposit, with capital growth and rental income both compounding on the full property value — not just the cash contributed. We cover the mechanics of this, along with the tax advantages that apply across all SMSF property strategies, on our SMSF Loans page.

What’s Different About Commercial Lending in Super

• Deposits are typically larger — commercial SMSF loans generally require 30–35% down, compared with the smaller deposits sometimes available on residential lending in the past
• Loan terms and rates differ — commercial SMSF loans are usually priced and termed differently to residential, and fewer lenders offer them, so getting the right introduction matters
• The same bare trust structure applies — your SMSF still needs a separate holding trust for the duration of the loan, exactly as with any LRBA
• Tenant arrangements need care — if your SMSF leases the property to a related party (including your own business), the lease must be on demonstrably arm’s-length commercial terms, properly documented and reviewed regularly

Is Commercial Property Right for Your Fund?

It tends to suit funds that:

• Have a meaningful deposit but not the full purchase price, and still want to use leverage
• Are business owners wanting their SMSF to own their business premises
• Want longer lease terms and a tenant profile less exposed to the vacancy patterns of residential property
• Are comfortable with a less liquid asset in exchange for the yield and leverage commercial property can offer

If your fund is fully cashed up and wants to avoid gearing altogether, our Residential (Cash Purchase) or Fractional Investment paths may be a better starting point. Not sure which fits? Our SMSF Pathfinder takes 30 seconds and points you in the right direction.

How We Help

We start with your fund’s strategy, not a listing. Ask your accountant or financial adviser to prepare a Statement of Advice, share it with us, and we’ll identify commercial properties that match your fund’s budget, risk profile, and — where relevant — your own business’s premises needs.

This is general information, not personal financial or legal advice. Commercial SMSF lending and related-party leasing carry specific compliance obligations — speak with your accountant or financial adviser before entering into any arrangement.