Can you still buy commercial property through your SMSF?

A significant shift in superannuation lending policy is on the way, and if you have been considering purchasing property through a self-managed super fund (SMSF), the timing of your next move may matter more than you think.

What has been announced?

Following an agreement between the federal government and the Greens, legislation is expected to be introduced that would prohibit new limited recourse borrowing arrangements (LRBAs) within SMSFs. LRBAs are the structures currently used by SMSFs to borrow money to acquire property, both residential and commercial.

The (https://www.pm.gov.au/media/press-conference-parliament-house-canberra-23-june-2026)announcement (https://www.pm.gov.au/media/press-conference-parliament-house-canberra-23-june-2026) refers to a ban on new SMSF borrowing arrangements specifically for residential property acquisitions. However, the draft legislation has not yet been released, and there is no confirmed Treasury guidance or final say on whether commercial property will be treated differently. Until that detail is available, it would be premature to assume commercial property is exempt.

But for now, here’s what we do know:

• SMSF purchases for residential property that require finance will no longer be permitted once the legislation takes effect.
• Existing SMSF loans (https://3lane.com.au/services/smsf-loans) and borrowing arrangements for residential property are expected to be grandfathered and remain unaffected.
• A transition period of 45 days is proposed following Royal Assent of the legislation, which will also cover transactions already underway.
• No fixed commencement date has been announced – the 45-day clock starts from Royal Assent, which has not yet occurred.

How do SMSFs currently use borrowing to buy commercial property?

Under current rules, an SMSF can borrow to purchase commercial property through an LRBA. The property is held in a bare trust until the loan is repaid, at which point ownership transfers to the fund. This structure has been a popular strategy for both investors and business owners (https://3lane.com.au/industries/small-business-owners) for good reason.

An LRBA limits the recourse your lender might have if you default on your investment loan to only the property in question. All other assets held by your SMSF can’t be touched.

For property investors, SMSF loans for commercial property allow you to hold an income-producing asset inside a concessionally taxed environment (https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf/smsf-administration-and-reporting/how-smsfs-are-taxed). Rental income is taxed at 15% inside the fund during the accumulation phase, and potentially 0% in the pension phase. Capital gains on assets held for more than 12 months attract a one-third discount inside the fund, and no capital gains tax (CGT) applies at all if the property is sold when the fund is in pension phase.

For business owners, there are even more advantages. As a business owner, you can use your SMSF to purchase the premises from which your business operates, and then lease it back to your business, as long as the rent is at market rates. This redirects the cost of occupying your premises back into your own retirement savings rather than a landlord's pocket. An experienced SMSF mortgage broker can help structure this correctly from the outset.

What do the changes mean for an investor considering their next move?

Given the legislation has not yet received Royal Assent, SMSF borrowing arrangements remain available under current rules, including for residential purchases.

For investors who have been considering an SMSF loan for commercial or residential property and want to act before any changes take effect, the window is still open. But the political momentum behind the proposal suggests it is likely to progress through Parliament.

The 45-day transition period following Royal Assent is not long, and establishing the trust structure within your SMSF, finding and bidding on the right property, and reaching settlement will take time. Engaging an SMSF mortgage broker and your accountant now – rather than waiting for the legislation to be finalised – puts you in the strongest possible position.

The pros of SMSF commercial property

For investors weighing up whether this strategy is right for them, here are some of the advantages of this process under the current rules.

• Concessional tax treatment, as rental income is taxed at just 15% inside the fund during accumulation, and potentially 0% in the pension phase
• Lease-back option for business owners, meaning your business pays market rent directly into your retirement savings rather than to a landlord.
• The lender's recourse is limited to the purchased asset, leaving the rest of the fund's assets protected.
• Holding a capital growth asset inside a low-tax environment can produce compounding benefits over time.

The cons of SMSF commercial property

This strategy does not suit everyone, and there are some drawbacks to consider.

• SMSF lending typically requires a bigger deposit as loan-to-value ratios (LVRs) are lower than those available through standard commercial property finance (https://3lane.com.au/services/commercial-finance).
• Not all lenders offer SMSF loans for commercial property, which can limit your options.
• The structure must meet the fund's investment strategy and pass strict compliance requirements (https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf/smsf-investing/smsf-investment-requirements) set out by the Australian Taxation Office.
• Property is an illiquid asset, which can impact your fund's cash flow.

Should you act now or wait?

The right move depends on your individual circumstances, how far along your planning is and what type of property you are considering. What is clear is that waiting for the legislation to be finalised before beginning the process could mean you run out of time to complete the transaction under current rules.

Navigating SMSF loans for commercial property is more complex than standard commercial lending. Fewer lenders operate in this space, the compliance requirements are stricter and the structuring decisions made at the outset have long-term consequences for the fund.

Working with an experienced SMSF mortgage broker who understands both the lending landscape and the superannuation rules means you get the finance side handled properly from day one. As commercial finance brokers (https://3lane.com.au/blogs/what-does-a-commercial-finance-broker-actually-do)across Sydney and beyond, the team at 3LANE Finance works with SMSF trustees, business owners and commercial investors to structure lending that suits both the fund's needs and the client's broader property strategy.

Thinking about SMSF loans for commercial property or want to understand how the proposed changes affect your situation? (https://www.3lane.com.au/contact-us)Get in touch with the team at 3LANE Finance (https://www.3lane.com.au/contact-us).

FAQs

Can SMSFs still borrow to buy commercial property?

Currently (late June 2026), yes. The proposed changes target new LRBA borrowing arrangements for residential property acquisitions. Commercial property strategies within SMSFs remain available under existing rules, though the final scope of the reforms has not yet been confirmed.

What is an LRBA?

A limited recourse borrowing arrangement (LRBA) is the legal structure an SMSF uses to borrow money to purchase an asset such as property. The lender's recourse is limited to the asset being purchased, protecting the rest of the fund. LRBAs for residential property are the structure the proposed legislative changes are targeting.

Can a business owner buy their own premises through their SMSF?

Yes, this is a common use of SMSF loans for commercial property. The business pays market rent to the fund, redirecting occupancy costs into the owner's retirement savings. The strategy must meet strict compliance requirements, so specialist advice from an SMSF mortgage broker and accountant is essential.

What types of commercial property can an SMSF purchase?

SMSFs can purchase a range of commercial assets, including offices, warehouses, retail premises, childcare centres (https://3lane.com.au/industries/childcare-centres), medical facilities (https://3lane.com.au/industries/medical-healthcare) and industrial properties. The property must meet the fund's investment strategy and the superannuation sole purpose test (https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf/smsf-investing/smsf-investment-requirements#Solepurposetest). Business real property – premises used wholly and exclusively in a business – can also be leased back to a related party.