One of the most powerful – and often misunderstood – strategies we see as SMSF accountants is when business owners buy their commercial property through their SMSF.
Instead of paying rent to someone else, you could be paying it into your own retirement savings. It’s a way to build long-term wealth, gain stability for your business, and potentially access some generous tax benefits along the way.
When we talk with business owners, we often find the bigger issue isn’t comparing SMSFs with industry funds – it’s awareness. Most don’t realise that an SMSF can:
- Give them the chance to own their own premises instead of renting
- Provide stability by taking landlord uncertainty out of the picture
- Offer smart structuring options, like selling an existing property into super to free up cash or protect assets
For many, this realisation changes the way they think about both their business and their retirement planning.
What Counts as Business Real Property?
The ATO has a strict definition of business real property. In simple terms, this means land or buildings that are wholly and exclusively used for business purposes. If the property meets this definition, then it means a member of the SMSF or a related party can lease the property as a tenant (so long as on arm’s length terms). That could be:
- An office space for your legal practice
- A warehouse for your electrical business
- A retail shopfront for your family store
- A medical suite for your practice
What doesn’t qualify as business real property? Your family home, a holiday house, or a residential investment. Even if you run a small side hustle from your garage, that doesn’t make your house eligible.
On top of that, there are rules you need to follow:
- Sole purpose test – your SMSF must operate for the purpose of providing retirement benefits, not giving you cheap rent
- Arm’s length requirement – if your business rents the property from your SMSF, the rent must be set at market value and paid on time just as if you were dealing with an unrelated landlord
These rules protect your SMSF from being used as a “personal piggy bank” and ensure everything stacks up with the ATO.
Unlocking Property Ownership When Funds Are Tight
A common challenge for many business owners is wanting to buy their own premises but not having enough capital outside of super to make it happen.
This is where an SMSF can be a powerful tool. By using the cash already sitting in your superannuation – and potentially leveraging it with borrowings – you may be able to secure a commercial property that would otherwise be out of reach.
We’ve seen this strategy open doors for many clients. Instead of remaining at the mercy of landlords or watching their retirement savings tied up in managed funds they don’t fully understand, they use their SMSF to buy their own business premises.
The Big Benefits for Business Owners
So why do so many of our business-owner clients look at this strategy? Here are the major advantages.
1. Control Over Your Premises
Owning your business property inside your SMSF means stability. You know exactly where your business will operate long-term.
And the control works both ways. As the business owner, you’re not dealing with an unpredictable landlord. As the SMSF trustee (and landlord), you know you have a tenant – yourself – who is motivated to look after the building, pay rent on time, and keep the property in good condition.
2. SMSF Tax Benefits
Rental income your SMSF receives from your business is generally taxed at just 15% – much lower than company or personal tax rates. And when your SMSF eventually sells the property, there can be significant capital gains tax concessions too.
3. Paying Rent Into Your Own Super
Instead of rent money disappearing to a third-party landlord, every dollar of rent goes into your SMSF. Over time, that rent – plus capital growth on the property – helps fund your retirement.
4. Using Super to Help Fund the Purchase
With the right structuring, your SMSF can borrow to purchase a property under what’s called a limited recourse borrowing arrangement. This means you don’t need to have the entire purchase price sitting in super already.
Even if you have the funds outside of super, using super to buy business property is still worth considering. Why? Because super is separate from all other assets, risks, and entities. In practice:
- Banks can only take a charge over the property acquired in super – nothing else
- Outside of super, banks will often secure loans against multiple assets
- Super is the most tax-effective and asset-protective environment available in Australia
5. Building Wealth in Two Places at Once
Your business gets a stable home, and your SMSF gets a solid, income-producing asset. You’re backing yourself – and creating long-term wealth in the process.
For business owners who want more control and stability, an SMSF can turn rent into retirement wealth. In our next blog, we’ll explore real client stories, succession considerations, and a key exemption that makes this strategy even more flexible.
Contact us if you’d like to explore whether owning your business premises in super makes sense for you.
Disclaimer: This article is general information only and does not take into account your personal circumstances. Always seek professional advice before making financial decisions.
