Can an SMSF Buy Business Premises?

Can an SMSF buy business premises? — general information

Under Australian superannuation legislation, an SMSF may be able to purchase commercial property, including property used as business premises. This is a distinct area of SMSF investment that requires careful compliance with SMSF legislation, the fund's trust deed and investment strategy, as well as independent advice from a licensed financial adviser, solicitor and accountant.

Obtain Finance does not determine whether an SMSF should or should not buy business premises. We provide credit assistance only — helping trustees understand the lending side of an SMSF commercial property transaction.

General SMSF commercial property finance pathway

Where an SMSF has sufficient assets, an appropriate investment strategy and trustee approval, it may be able to purchase commercial property using an SMSF commercial property loan — sometimes referred to as an SMSF LRBA (Limited Recourse Borrowing Arrangement). This involves a bare trust structure holding the property on behalf of the SMSF until the loan is repaid.

The SMSF commercial property lending market involves a smaller number of specialist lenders compared to residential SMSF lending. Deposit requirements, interest rates, documentation requirements and eligibility criteria vary by lender.

LRBA borrowing — plain English overview

A Limited Recourse Borrowing Arrangement (LRBA) is the structure prescribed under Australian law for an SMSF to borrow money to acquire an asset. Key features in general terms:

• The SMSF borrows from a lender to purchase a single acquirable asset
• The asset is held in a separate bare trust until the loan is repaid
• The lender's recourse is limited to the asset — other SMSF assets are generally protected
• On loan repayment, the asset can be transferred into the SMSF
• An LRBA must comply with the Superannuation Industry (Supervision) Act 1993

This is general information only. The legal and compliance requirements of an LRBA are complex. Independent legal and financial advice is required.

Related business tenancy considerations

Where a business related to the SMSF trustee intends to lease the commercial property from the SMSF, there are specific compliance considerations under SMSF legislation regarding related-party transactions. This is a complex area requiring specialist SMSF legal and financial advice before any arrangement is entered into. Obtain Finance does not provide advice on related-party lease arrangements.

Deposit and SMSF liquidity considerations

SMSF commercial property lenders typically require a meaningful deposit from within the SMSF. After a commercial property purchase, the SMSF also needs to maintain sufficient liquidity to meet ongoing obligations including member benefit payments, insurance premiums and fund expenses. This is a key consideration in SMSF financial planning and requires independent advice from an SMSF adviser.

How lenders assess SMSF commercial property loans

Lenders assessing SMSF commercial property loan applications typically consider:

• SMSF trust deed and whether it permits borrowing and the investment type
• Current SMSF balance and assets
• Member contributions and income flows
• Commercial property type, location and value
• Lease status and projected rental income
• Fund liquidity after purchase
• Bare trust structure documentation

Why independent advice is required

How Obtain Finance can help with the credit side

Obtain Finance provides credit assistance to SMSF trustees exploring commercial property lending. This includes helping identify lenders who may consider SMSF commercial property loans, understanding documentation requirements, and supporting the loan application process. We work alongside your SMSF adviser, accountant and solicitor — we do not replace them.