Business Owners: How to Buy Your Premises Through SMSF

If you're a business owner paying rent for your premises, you could instead be paying that rent into your own super fund. Here's how the SMSF commercial property strategy works.

The Strategy Explained

Instead of paying rent to a landlord, your business pays market rent to your SMSF, which owns the commercial property. This rent builds your retirement savings while your business gets a tax deduction.

Real Example: Sarah's Accounting Practice

Before SMSF Purchase:

• Annual rent paid to landlord: $48,000
• Over 15 years: $720,000+ paid to landlord
• At retirement: Nothing to show for it

After SMSF Purchase:

• SMSF balance: $320,000
• Property purchase price: $650,000
• SMSF loan: $455,000 (70% LVR)
• Annual rent to SMSF: $48,000
• At retirement (15 years): Owns property worth ~$1.1M with no debt

Step-by-Step Process

1. Review your SMSF: Ensure your trust deed permits borrowing and update your investment strategy
2. Get specialist advice: Work with an SMSF accountant, financial adviser, and solicitor
3. Secure finance: Get pre-approval through an SMSF lending specialist
4. Establish bare trust: Your solicitor sets up the holding trust structure
5. Purchase property: Contract is signed in the bare trustee's name
6. Sign lease: Formal lease agreement at market rent between your business and SMSF

Key Requirements

Requirement	Details
Minimum SMSF Balance	$200,000+ recommended
Deposit Required	30-40% for commercial
Rent Must Be	At market rate (get valuation)
Lease Agreement	Formal written lease required

The Tax Benefits

• Business: Rent payments are 100% tax deductible
• SMSF: Rental income taxed at only 15% (0% in pension phase)
• Capital gains: When sold, only 10% CGT (0% in pension phase)

Important Considerations

• If your business fails, the SMSF still owns a valuable property
• You cannot use the property for personal purposes
• The lease must be arm's length, with no special deals
• Insurance and outgoings typically paid by SMSF

Interested in purchasing your business premises through SMSF? Learn more about SMSF loans or book a consultation with our commercial lending specialists.