2 May 2026

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There's a particular conversation we have a lot at Claremont. A small business owner has been paying rent on their warehouse, office or retail space for years, the lease is up for renewal, and someone (usually their accountant) has mentioned they could buy the building through their self managed super fund instead. Suddenly the rent they're already paying could be flowing into their own retirement savings rather than a landlord's pocket.

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It's a strategy that genuinely works for a lot of business owners. It's also one of the most structurally complex transactions in Australian lending. Here's how it actually works in 2026, what the numbers look like, and the parts that catch people out.

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The basic structure

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An SMSF can't borrow the way you and I can. Instead, it uses a Limited Recourse Borrowing Arrangement (LRBA), which is a specific structure permitted under the Superannuation Industry (Supervision) Act.

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In plain English, here's what happens. A separate trust (called a bare trust or holding trust) is set up specifically to hold the property. The bare trust borrows the money. The SMSF makes the loan repayments from a combination of rent and ongoing super contributions. The property is held in the bare trust until the loan is fully repaid, at which point legal title transfers to the SMSF.

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The "limited recourse" part matters. If something goes wrong and the loan defaults, the lender's only claim is against the property itself. They can't touch the rest of the SMSF's assets. That protection is the whole point of the structure, and it's also why pricing on these loans sits higher than standard commercial finance.

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The numbers in 2026

A few benchmarks worth knowing.

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Interest rates. Commercial SMSF loans currently sit roughly 1 to 2% above standard commercial property rates, typically landing in the 7% to 8.5% range depending on the lender, the property type, and the LVR.

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Maximum LVR. Most lenders cap commercial SMSF loans at 70% to 75% of the property value. A few will go higher in specific circumstances, but plan around a 25% to 30% deposit at minimum.

Loan size. The market generally runs from around $100,000 up to $5 million, with some specialist lenders going to $10 million on lower LVRs. Commercial SMSF loans are typically larger than residential SMSF loans, which is why the lender panel tilts towards specialists.

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The lender panel. The major banks largely exited SMSF lending some years ago. The current panel of around 20 lenders is dominated by non bank lenders and specialists (La Trobe Financial, Liberty, Thinktank, Firstmac and a handful of others). Each has different policies, different appetite for property types, and meaningfully different pricing.

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Minimum SMSF balance. Most lenders want to see at least $200,000 to $300,000 in the fund before they'll consider an LRBA. Some require more. The reason is straightforward: the lender wants confidence the fund can keep servicing the loan and its ongoing administration costs even if the property sits vacant for a few months.

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Cash buffer post settlement. Most lenders also want to see at least 12 months of total loan repayments held in liquid assets in the fund after settlement. On a loan with $7,000 monthly repayments, that's an $84,000 cash buffer that can't be tied up in the property itself.

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Why business owners use this

The strategy makes the most sense when you're already paying commercial rent for premises your business uses. The reason is simple. Commercial property in an SMSF is allowed to be leased to a related party (your business) at market rate, which is a special exception that doesn't apply to residential property. So the rent your business pays moves from being an expense to a third party landlord into becoming a contribution to your own retirement.

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Three flow on benefits compound that.

Tax effective rental income. Rent received by the SMSF is taxed at 15% during accumulation phase, and 0% in pension phase. That's typically meaningfully lower than the marginal tax rate the rent would otherwise be reducing on your business's tax return.

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Capital gains tax treatment. If the SMSF holds the property for more than 12 months, the effective CGT rate is 10% in accumulation phase. In pension phase it can be 0%. Both compare favourably to selling commercial property held personally or through a company.

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Asset protection. The property is held inside the SMSF, which gives a degree of separation from the trading risks of the business itself.

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The traps that catch people out

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This is where the technical detail starts to matter, and where having a specialist broker and accountant working together pays off.

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The bare trust must be established correctly before the property is purchased. If the title is registered in the wrong name (the SMSF directly, for example, instead of the bare trustee), the structure can fail and the consequences are messy. We've seen people lose deals because the bare trust wasn't set up in time.

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The "single acquirable asset" rule. Each LRBA can only be used to buy one property. If your SMSF wants to buy two properties, you need two LRBAs and two separate bare trusts.

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You can't materially improve the property using borrowed funds. Repairs and maintenance are fine. Extending the building, adding a mezzanine, or anything that changes the character of the asset has to be funded from existing SMSF cash, not from the loan.

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Related party leases must be at market rent. This is non negotiable. If you lease the property to your own business at below market rent (or above), you've breached the sole purpose test and your fund is at risk of becoming non compliant. Get a formal market rent appraisal at the time of the lease and review it regularly.

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Settlement timelines are tight. SMSF lending takes longer than standard commercial finance, often 6 to 10 weeks. Signing a contract subject to SMSF finance with a 30 day settlement is a recipe for stress. Pre approval before you make an offer is essential.

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The Division 296 question

Worth flagging because it's increasingly relevant. The proposed Division 296 tax (still under discussion at the federal level) would apply additional tax on earnings of SMSF balances above $3 million from 1 July 2026 if it's legislated in its current form.

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For most business owners buying their commercial premises, this won't be an immediate issue. But if you're putting a $2 million property into a fund that already has $1.5 million in other assets, the combined balance starts to interact with the proposed threshold. This is exactly the kind of conversation that needs to happen with your accountant before the structure is put in place, not afterwards.

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Where to start

If you're seriously considering buying your business premises through your SMSF, the practical sequence looks like this.

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Talk to your accountant first about whether the structure suits your overall position, including the Division 296 implications. This is the foundation everything else sits on.

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Get a clear read on your current SMSF balance, your annual contribution capacity, and how the post settlement cash buffer requirement interacts with your fund's liquidity.

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Get pre approval before you start making offers. SMSF lending is too complex and the timelines too tight to leave finance to chance.

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Make sure your accountant, broker, and conveyancer are all briefed and working from the same brief before you sign a contract.

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If you'd like to talk through whether an SMSF commercial property loan suits your situation, get in touch with the Claremont team. We work alongside your accountant, get the structure right from day one, and access lenders most clients can't reach directly.

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The information in this article is general in nature and does not take into account your personal financial situation, objectives or needs. SMSF lending and superannuation are highly regulated areas, and any decisions should be made in consultation with your accountant, financial adviser and a qualified mortgage broker. Lending criteria, rates and government rules referenced are current as of the publication date and are subject to change. Claremont Financial Pty Ltd ACN 685 553 744, Australian Credit Licence 389087.

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