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Buying business premises through an SMSF went from one option among several to the main one almost overnight. Since 10 August 2026 a new limited recourse borrowing arrangement over real property has to be over business real property, which rules out the residential purchases most funds were making.
If you run a business and your fund has a reasonable balance, that change works in your favour rather than against you. The premises your business already occupies is exactly the asset the remaining rules were written around.
The rules behind buying business premises through an SMSF changed on 10 August 2026. A new LRBA over real property must now be over business real property, so a fund can no longer borrow to buy a standard residential investment.
Arrangements entered before that date are untouched, so buying business premises through an SMSF under an older LRBA is unaffected. Refinancing one is also unaffected, and a binding contract exchanged before 10 August can still settle. Nothing has to be unwound.
What the change does is narrow new borrowing to commercial and business use property. Buying business premises through an SMSF sits squarely inside that, which is why enquiries for it have risen sharply since August.
The wider position, including what a fund can still buy outright with cash, is covered in what an SMSF can still buy.
Buying business premises through an SMSF turns on one definition. Business real property means land and buildings used wholly and exclusively in one or more businesses. It is a use test, not a zoning test, and that distinction catches people out in both directions.
Zoning is irrelevant. A house used entirely as a medical practice can qualify as business real property. A commercially zoned building with a residence above it that is lived in generally will not, because the use is no longer exclusive.
The word doing the work is exclusively. Partial business use fails. A warehouse with a caretaker flat, a shop with a residence behind it, or premises partly used privately all need advice before the fund commits.
Primary production land carrying a dwelling has its own treatment, and the ATO has published examples. Every property is assessed on its own facts, so an opinion on a similar property is not a substitute for one on yours.
This is the part that makes buying business premises through an SMSF attractive, and it is a genuine exception rather than a loophole.
An SMSF generally cannot acquire an asset from a related party, and generally cannot hold more than five per cent of its assets in in-house assets. Business real property is carved out of both. The fund can buy the premises from you, and lease it back to your business.
The conditions are strict and they are not optional. The purchase must be at market value. The lease must be on arm’s length commercial terms, documented, and the rent must actually be paid at the market rate and on time.
That discipline is what makes buying business premises through an SMSF work. Rent paid by the business becomes a contribution to the fund that sits outside the contribution caps, which is the real attraction. Miss the arm’s length standard and the fund risks losing its concessional tax treatment.
Lending for buying business premises through an SMSF is a specialist market. No major bank writes it, and roughly a dozen lenders remain active, so the terms are tighter than a residential loan and the rate is higher.
| What lenders look at | Typical position | Why it matters |
|---|---|---|
| LVR on business real property | 65 to 80 per cent | Owner-occupied premises often sit at the upper end |
| Minimum fund balance | Commonly $200,000 to $300,000 | Below this the structure rarely stacks up against its costs |
| Liquidity buffer after settlement | Around 5 to 10 per cent of asset value | The fund must still meet expenses, insurance and any pensions |
| Rent | Market rate, documented lease | Supports servicing and is an audit focus |
| Approval timeframe | Commonly 4 to 6 weeks | Bare trust review and auditor sign-off sit inside this |
| Lender type | Specialist and non-bank | No major bank writes SMSF loans |
Figures are indicative market positions as at November 2026 and vary by lender and by property. Confirm against a current panel before you plan around them.
The deposit side in detail is in the SMSF loan deposit guide.
When buying business premises through an SMSF the fund does not hold the property directly while the loan runs. A separate holding trust, usually called a bare trust, holds legal title and the fund holds the beneficial interest.
The borrowing is limited recourse, which is the point. If the fund defaults, the lender’s claim is limited to that single asset and cannot reach the fund’s other investments. That protection is what the whole arrangement is built on.
Title transfers to the fund once the loan is repaid. Getting the order of steps wrong, particularly signing a contract in the wrong name, is an expensive mistake to unwind and sometimes cannot be fixed at all.
The mechanics are set out in the limited recourse borrowing arrangement explainer.
The failures in buying business premises through an SMSF are rarely about the property. They are about the paperwork and the discipline afterwards.
Rent is the most common one. A lease signed and then not enforced, or rent paid late or at a discount because it is your own business, is exactly what an auditor looks for. The arm’s length standard applies every year, not just at purchase.
The second is the use test slipping. Premises that qualified at purchase can stop qualifying if part of the building is later used privately or sublet to a non-business occupant.
The third is cost. Between the bare trust, the specialist lender and the extra audit work, buying business premises through an SMSF carries real setup and running costs. On a small balance those costs can outweigh the benefit.
Our Sydney SMSF loan broker page covers how the lending side is arranged, and a conversation before the fund commits is cheaper than unwinding a structure afterwards.
Yes, provided the property satisfies the business real property test, which means it is used wholly and exclusively in one or more businesses. Buying from an unrelated vendor is simpler than buying from yourself because the related party acquisition rules do not come into it.
Buying business premises through an SMSF this way makes the fund your landlord, and the lease between the fund and your business still has to be documented and on arm’s length commercial terms.
Yes. Business real property is one of the narrow exceptions to the rule stopping an SMSF acquiring an asset from a related party. The transfer has to be at market value, supported by a valuation, and on arm’s length terms.
It can be done as a sale or as an in-specie contribution, though each has different stamp duty and capital gains consequences that need advice before anything is signed.
No. The change is prospective and applies to new limited recourse borrowing arrangements over real property entered into on or after 10 August 2026. Existing arrangements continue unaffected and do not have to be unwound or converted.
The ATO has also confirmed that refinancing an existing LRBA is not caught, though varying the terms materially is worth getting advice on before you proceed.
Market rent, and it has to actually be paid. The fund is dealing with a related party, so the arm’s length standard applies to the rate, the terms and the enforcement.
Get a market rent assessment, document the lease properly, and pay on the dates the lease specifies. Discounted or irregular rent because the tenant is your own business is one of the most common findings in SMSF audits of this structure.
Most lenders want to see a fund balance comfortably above two hundred thousand dollars, and many prefer three hundred thousand or more. That is a lending position rather than a legal minimum.
The practical test is whether the setup and ongoing costs, including the bare trust and the additional audit work, are justified by the asset.
On smaller balances they often are not, whatever the lender will approve. Buying business premises through an SMSF has to clear a commercial test as well as a lending one.
Yes, but not with a new borrowing. A fund can still buy residential property outright with its own cash, because the 10 August 2026 change restricts what a new limited recourse borrowing arrangement can be used to acquire, not what the fund may own.
Residential property that genuinely satisfies the business real property test, such as a house used entirely as consulting rooms, can also still be acquired under an LRBA.
The rules for entering an LRBA, the business real property requirement and what remains grandfathered are set out in the ATO guidance on limited recourse borrowing arrangements. Trustees should read it alongside advice specific to the fund, because the use test turns on the facts of the individual property.
Paritosh Wadhwani | Director and Principal Broker, APW Finance
Member of the Finance Brokers Association of Australia (FBAA). Arranging residential, commercial and specialist lending for Sydney clients across a panel of more than 50 lenders.
APW Finance Pty Ltd, 304/20a Lexington Drive, Bella Vista NSW 2153. Email: info@apwfinance.com. Phone: +61 447 959 546.
ACN 620 646 479 | ABN 79 620 646 479
This guide is general information only. It does not take into account your objectives, financial situation or needs, and it is not financial or credit advice. Lending criteria, interest rates, duty thresholds and government schemes change, and every application is subject to lender approval.
Consider whether this information suits your circumstances and seek independent advice before acting. Figures quoted are current at the date below and should be confirmed before you rely on them. Last reviewed: November 2026.
APW Finance Pty Ltd delivers expert lending solutions with personalised service, empowering clients across residential, commercial, and business sectors.