SMSF buying its own business premises

The situation

The following is an anonymised composite reflecting a recurring pattern, not a specific settled transaction. The members of a self-managed super fund also run an operating business that currently leases its premises from an unrelated landlord. Facing a rent increase at renewal, they consider having their SMSF purchase the premises instead, with the business then leasing it back from the fund at market rent.

Why it's hard

An SMSF acquiring property must borrow under a limited recourse borrowing arrangement, with the property held in a bare trust until the loan is repaid, and the fund's trustees must be satisfied the purchase is genuinely consistent with the fund's investment strategy before proceeding.⚠ A related-party lease between the business and the fund must also be on arm's-length, market-rate terms, which needs to be properly documented and periodically reviewed to remain compliant.

How it can be structured

An SMSF commercial loan under a properly established LRBA and bare trust is the standard structure, sized against the fund's contribution history, liquidity and the property's ability to service the loan through the lease, generally at a somewhat more conservative loan-to-value ratio than a standard commercial property loan; the exit is the ongoing lease income servicing the facility over its term, with the property ultimately held within the fund's asset base. The bare trust and its trustee must be established, and legal advice obtained on the fund's investment strategy and the related-party lease terms, before a contract of purchase is signed, since sequencing errors here can unwind the arrangement's compliance entirely.⚠ Where the fund's liquidity is tight, members sometimes make an additional contribution ahead of settlement to strengthen the fund's position and support a smoother approval.

The related-party lease terms deserve particular attention, since an arm's-length market rent, reviewed periodically against comparable local commercial rents, is what keeps the arrangement compliant, and trustees should engage an independent valuer for the rent assessment rather than setting it based on what the business can conveniently afford to pay. Where the fund's liquidity is genuinely tight relative to the purchase, trustees sometimes phase a larger member contribution across more than one financial year ahead of settlement, subject to standard contribution caps, to strengthen the fund's position without breaching those limits. Lenders will also want to see the fund's broader investment strategy documented in a way that explicitly contemplates holding a single, larger illiquid asset like a commercial property, rather than a generic strategy document that does not address concentration risk at all. Because the LRBA structure and bare trust must be established correctly before a contract of purchase is signed, trustees should build several weeks into their timeline for this legal work ahead of identifying and making an offer on a specific property.

What it typically costs

Pricing on an SMSF commercial loan reflects the LRBA structure and the fund's financial position, quoted on enquiry once a lender has reviewed the fund's accounts, contribution history and the property. Costs include establishment fees and the bare trust's own legal setup costs, which should be budgeted separately from the loan itself.

Timeline

1. Same day — scoping call confirming the fund's position, the property and the business's current lease.
2. 5–10 business days — bare trust and related legal structuring, run in parallel with lender submission.
3. 10–15 business days — credit approval, subject to trust deed and fund documentation.
4. 5–10 business days — settlement, with the related-party lease executed alongside.

Questions we'd ask you

1. Has your SMSF's accountant or financial adviser confirmed this purchase fits the fund's investment strategy?
2. What is the fund's current balance and contribution history, separate from the property being acquired?
3. Is a bare trust already established, or does this need to be set up before signing a contract?
4. What market rent has been assessed for the related-party lease, and by whom?
5. Can the fund cover its other ongoing obligations alongside servicing this facility?⚠

Related

SMSF commercial loans · SMSF trustees · Bare trust · LRBA