Yes. In Australia, an SMSF can borrow to buy commercial property using a Limited Recourse Borrowing Arrangement (LRBA), subject to strict rules.
How it works
- The SMSF establishes an LRBA.
- A separate holding/bare trust acquires the property.
- The lender provides the loan to the SMSF.
- The property is held on trust until the loan is repaid.
- Once repaid, legal title transfers to the SMSF.
Key benefits
- The SMSF can acquire a larger asset than it could with cash alone.
- If you own a business, your SMSF may buy business premises and lease them back to your business at market rent. This is one of the most common SMSF property strategies.
- Rental income and capital gains are taxed concessionally within super. (General superannuation tax rules apply.)
Important rules
- The property must satisfy the SMSF investment and sole purpose requirements.
- Commercial property leased to a related business must be leased on arm's length terms at market rent.
- Borrowing arrangements must comply with LRBA legislation and documentation requirements.
Recent change (effective 10 August 2026)
New LRBAs for property acquisitions are restricted to business real property. Business real property generally means land and buildings used wholly and exclusively in a business. Residential property generally cannot be acquired under a new LRBA after this date.
Example
Your SMSF has $300,000. It purchases a warehouse for $750,000:
- SMSF contributes deposit and costs.
- Bank lends the balance under an LRBA.
- Your operating business leases the warehouse from the SMSF at market rent.
- Rent flows into the SMSF and helps service the loan. (Subject to cash flow and lending requirements.)
Practical considerations
- Most lenders require significant deposits (often 30%+).
- The SMSF must have sufficient liquidity and cash flow.
- Legal, accounting, SMSF audit and trust establishment costs are higher than a standard property purchase.
If you would like to discuss further please contact us:
McNamara & Company - Chartered Accountants, located minutes from the Melbourne CBD
www.mcnamaraandco.au/contact-us
Phone +61 3 9428 1062
Email admin@mcnamaraandco.au
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