If your business rents its warehouse, clinic or shop, an SMSF business premises setup could see your own super fund buy that building, borrow to do it and collect your rent. New SMSF loans for residential property are off the table from 10 August 2026, but commercial property borrowing is still allowed.
It can work very well, or it can lock your retirement into one building at exactly the wrong time. It comes down to four tests, and the place to start is a written market rent appraisal for the premises you trade from.
In Episode 28 of Business Uncut, Reuben walks through the four tests, a worked borrowing example and the traps to plan for before your fund goes near a contract.
Key takeaways
- New SMSF loans to buy residential property are off the table from 10 August 2026, but commercial property borrowing is still allowed.
- The building has to be business real property: land and buildings used wholly and exclusively in a business, with no home use.
- Rent has to be market rent, on a proper written lease, paid on time. Treat your fund like the toughest landlord you’ve ever had.
- If the fund borrows, the rent has to pay the loan. Test the numbers at a lower rent before you commit.
Residential is out, commercial isn’t
A self-managed super fund (SMSF) is one you and a handful of others run yourselves, rather than a big retail or industry fund. From 10 August 2026, SMSFs can’t take out new loans to buy residential property. That ban is law now. Existing loans are grandfathered, which means they keep running under the old rules.
Most of the commentary has focused on what super can’t do anymore. Commercial property borrowing is still allowed, and for a business owner, the most interesting commercial building is usually the one you already trade from.
Why it matters now
The cash rate is sitting at 4.6% after the September rise, the fourth this year. Borrowing isn’t cheap, so every deal has to stack up on its own.
From 1 July 2026, there’s also an extra tax on earnings for super balances above $3 million, and more again above $10 million. Many owners are now quietly asking whether their super is working hard enough.
Hypothetical: the physio paying rent
Say, hypothetically, you run a physio practice and you’ve rented the same consulting rooms for eight years. You’ve paid the landlord well over half a million dollars in that time, and you own none of it. Meanwhile your super fund has a decent balance, ticking along.
Hypothetical example
What if the owner of that building was your own super fund?
So the question writes itself: what if the owner of that building was your own super fund? Here’s how we’d test it, in order.
Test 1 Business real property
The building has to be business real property. That’s the legal term for land and buildings used wholly and exclusively in running a business.
Super has strict rules about dealing with related parties (you, your family and the companies and trusts you control), and business real property is the big exception. It’s what lets your fund buy the building from you, or lease it back to your business.
- Generally fine: a warehouse full of your ecommerce stock, consulting rooms, a shopfront, a real estate office or a construction yard.
- Not fine: a shop with a flat upstairs that your nephew lives in.
The principle: if there’s any home use at all, stop and get advice before you go a step further.
Test 2 Market rent on a written lease
Rent has to be market rent, on a proper written lease, paid on time. The fund has to deal with you at arm’s length, which means on the same terms two strangers would agree to. Get that wrong and the income can be treated as non-arm’s length income, which is taxed at the top rate.
Hypothetically, if an agent says the building is worth $90,000 a year in rent, your business pays $90,000. Not $60,000 because it’s your own fund, and not whenever cash flow feels okay. The principle: treat your super fund like the toughest landlord you’ve ever had.
Treat your super fund like the toughest landlord you’ve ever had.
Test 3 Limited recourse borrowing, and the numbers
If your fund is borrowing, it has to be through a limited recourse borrowing arrangement. In plain English, that’s a loan where, if things go bad, the lender can only claim that one building, not the rest of your fund.
The property sits in a separate holding trust until the loan is paid off. While the loan is running, you can’t use the borrowed money to improve the building, or change it into a fundamentally different asset.
Here’s a hypothetical worked example:
- The building costs $1.2 million.
- Your fund puts in $500,000 plus the buying costs, and borrows $700,000.
- The lender’s rate will sit well above the 4.6% cash rate, so say interest runs around $50,000 a year.
- Rent comes in at $90,000 a year.
- Rates, insurance and repairs take maybe another $15,000.
That leaves roughly $25,000 a year, before the fund’s tax, to pay down the loan. It’s tight, but it works. If the rent is $70,000, it doesn’t. The principle: the rent pays the loan, not hope.
Test 4 Understand the tax shift
Your business pays the rent and generally claims it as a deduction, the same as now. While you’re still building the fund up, which is called accumulation phase, the fund pays 15% tax on the net rent. Once you retire and start a super pension, the income supporting that pension can generally be tax free, within limits.
In the hypothetical, the $90,000 that used to go to a landlord is now building your retirement instead. With a balance over $3 million, the building’s earnings get swept into that new extra tax too.
The principle: you’re moving money from one pocket to another, and the ATO mostly cares that you do it at arm’s length.
Four traps to plan for
Even if all four tests pass, watch for these:
- The lumpy problem. If the building is most of your fund, your eggs are all in one basket, and you can’t sell the bathroom to pay yourself a pension. Your fund needs an investment strategy, a written plan the trustees sign off on, that covers spreading risk and having cash on hand.
- The bad year. If your business hits a rough patch, your fund can’t just let the rent slide. Arrears to your own fund can turn into a compliance headache fast.
- The exit. If you sell the business, the buyer might not want your lease, or the fund’s building. Plan the exit before you go in, not after.
- Getting it in. If you already own the building personally or in a trust, moving it into super can trigger stamp duty and capital gains tax. It also eats into your contribution caps, the yearly limits on what you can put into super. The small business capital gains concessions are still around, which helps. But under the CGT changes from 1 July 2027, individuals and trusts selling from that date lose the 50% discount and move to indexation, where your cost is lifted for inflation instead, plus a 30% minimum tax on gains. Timing really matters.
For the right owner, in the right building, with a business that can pay market rent in a bad year, this can be a beautiful setup. For everyone else, it’s a trap with a nice view.
Your one job this week
This week
Ring a commercial agent and get a written market rent appraisal for the premises you trade from. That number tells you whether this stacks up.
Then run it through Test 3: if the rent covers the interest and running costs with something left for the loan, it’s worth a closer look.
Frequently asked questions
Can my SMSF buy my business premises from me?
Generally yes, if the building is business real property: land and buildings used wholly and exclusively in running a business. That’s the big exception to super’s related party rules, and any home use at all, such as a flat upstairs, is a reason to get advice first.
Can an SMSF still borrow to buy commercial property?
Yes. New SMSF loans for residential property are banned from 10 August 2026, but commercial property borrowing is still allowed. It has to be a limited recourse borrowing arrangement, where the lender can only claim that one building.
Does my business have to pay market rent to my SMSF?
Yes. It has to be market rent on a proper written lease, paid on time. If it isn’t, the income can be treated as non-arm’s length income and taxed at the top rate.
How is rental income taxed in an SMSF?
Your business generally claims the rent as a deduction, and in accumulation phase the fund pays 15% tax on the net rent. Once you start a super pension, the income supporting it can generally be tax free, within limits.
Keep reading
Want to run the numbers on your building?
We’ll look at your fund, your premises and the rent, and show you whether it stacks up.
General information only, not personal tax, legal or financial advice. Figures are hypothetical examples. Seek advice from your SMSF specialist and financial planner. New Wave SMSF. Representatives of NWG Financial Services Licence No: 538619.
