How to use your SMSF to buy your office or factory 

If you’re a business owner paying rent on your office or factory space, you’re watching a significant portion of your income disappear each month. What if those rental payments could help build your retirement nest egg instead?

For many Melbourne professionals running their own businesses, buying commercial property through a self-managed superannuation fund (SMSF) offers exactly that opportunity. With over $105 billion held in non-residential property across SMSFs, according to the Australian Taxation Office (ATO), it’s a strategy that has gained traction with business owners who want more control over their workspace and their retirement planning.

Please note that this article is general information only. Get advice from a licensed financial adviser or qualified tax professional before acting.

Why business owners buy their premises through an SMSF

A key driver of this growth is the ability to rent a commercial property owned by your SMSF back to your business. Residential property cannot be leased to members or related parties, but commercial premises used wholly and exclusively for business purposes are exempt from those restrictions.

This means your business can pay rent to your SMSF, offering several benefits:

• You become your landlord: You can avoid unpredictable rent increases and short-term leases. Your business gains long-term stability, and you decide the terms.

• A tax-efficient income stream: The rent your business pays becomes income for your SMSF, taxed at a maximum rate of 15% – far lower than many personal tax rates.

• Future tax-free gains: Once your SMSF enters retirement (pension) phase, rental income and any future capital gains on the property may become tax-free.

Non-residential real property has become a key part of the SMSF landscape. ATO data shows that direct investment in non-residential real property grew 44% between June 2020 and June 2025.

This reflects growing demand from business owners and professionals who want more control over their workspace and retirement savings.

What are the rules for buying commercial property through an SMSF?

Because SMSFs exist to provide retirement benefits, there are strict rules around what properties they can buy.

Key requirements include:

• The sole purpose test: The property must be acquired and maintained solely to provide retirement benefits to the fund’s members.

• Market-value acquisition: If the property is bought from a related party, an independent market valuation is required.

• Arm’s-length lease terms: If your SMSF owns the property and you lease it back to your business, the lease must reflect standard commercial terms and market-rate rent.

• Investment strategy alignment: Trustees must be able to show that buying a commercial property aligns with the fund’s investment strategy and does not result in over-concentration.

• Borrowing rules: If your SMSF needs to borrow to buy the property, the loan must be set up under a limited recourse borrowing arrangement (LRBA).

What is an LRBA?

Under an LRBA, your SMSF borrows to buy the property, but the lender’s recourse is limited to the property itself. If the loan cannot be repaid, the lender cannot access other assets in the SMSF.

The property is held in a bare trust, which is a separate legal entity from your SMSF. The bare trustee holds legal title until the loan is fully repaid, after which ownership transfers to the SMSF. The bare trustee cannot be the same entity as your SMSF trustee.

While this structure protects other SMSF assets, it also adds complexity.

• Lender appetite: Not all lenders offer these loans, and those that do have strict lending criteria.

• Deposit requirements: Deposits tend to be higher than for standard commercial loans. Loan-to-value ratios often sit between 70% and 80%.

• Loan servicing: The loan repayments must be paid solely by the SMSF. Lenders will assess the fund’s financial capacity, looking at projected rental income, member contributions and other fund assets.

When SMSF commercial property might suit you

Using your SMSF to buy commercial property may suit you if:

You own or plan to start a business

Buying the premises and leasing it back to your company gives your SMSF a hard asset, provides rental income and gives your business long-term security.

You want long-term capital growth

Commercial property can deliver stable returns over time. For SMSFs with a healthy balance, it can support a diversified retirement strategy.

You prefer to leverage your super rather than personal cash flow

Using your SMSF’s assets or borrowing capacity helps you keep personal cash free for other commitments.

What to consider before going ahead

Disclaimer: This is general information only. Get advice from a licensed financial adviser or qualified tax professional before acting.

There are a few caveats worth considering carefully, and where the support of a mortgage broker and an accountant experienced in SMSFs is vital.

• Diversification: If a large portion of your super goes into one property, your retirement savings may be too exposed to property-market conditions.

• Liquidity: Your commercial building or factory might not sell quickly. If you need to raise cash (for pension payments, fund expenses or personal emergencies), you may not be able to act swiftly.

• Compliance: All related-party transactions must meet strict ATO rules. Mistakes can lead to significant penalties.

• Cost: SMSFs with property typically incur higher ongoing costs, including accounting, auditing, bare trust establishment and legal fees. These expenses need to be weighed against the potential benefits.

How AXTON Finance can help

As experienced Melbourne mortgage brokers, we can help you assess whether using your SMSF to buy an office or factory is a suitable strategy. We guide you through the lending process, from structuring an LRBA to preparing documents for the lender and your SMSF’s advisers.

We work with a panel of SMSF-friendly lenders and collaborate with your accountant and financial adviser to ensure the structure meets ATO rules and fits your SMSF investment strategy.

If you’re exploring whether your SMSF could acquire a commercial property, speak with AXTON Finance. We’ll help you understand your borrowing power, the loan structure and the steps involved so you can make an informed decision. Call 03 9939 7576, email getabetterrate@axtonfinance.com.au or get in touch today.