How an SMSF commercial loan works
Superannuation law generally stops an SMSF from borrowing. The exception is a limited recourse borrowing arrangement (LRBA). Under an LRBA:
- The loan is used to buy a single asset — here, a commercial property.
- The property is held in a separate bare trust (also called a holding or custodian trust) until the loan is fully repaid.
- If the loan defaults, the lender can only claim that property — not the other assets in your fund.
- Rent and contributions flow into the fund and are used to repay the loan.
Most lenders also require a corporate trustee for both the SMSF and the bare trust. If your fund has individual trustees, that's usually the first thing to fix.
Buying your business premises in super
This is the most common reason business owners come to us. Instead of paying rent to a landlord, your business pays market rent to your SMSF. That rent is generally taxed at concessional super rates while the fund is in accumulation phase.
Because commercial premises used wholly and exclusively in a business count as business real property, your SMSF can:
- buy the property from you or a related party (at market value), and
- lease it to your own business — on commercial, arm's-length terms.
Residential property doesn't get these exceptions, which is why commercial property is so popular in SMSFs.
Deposit, LVR and how much you can borrow
| What lenders look at | Typical range |
|---|---|
| Loan-to-value ratio (LVR) | Commonly around 60–80%, depending on lender and property |
| Loan term | Often up to 15–25 years |
| Servicing | Rent, plus regular super contributions into the fund |
| Liquidity | Most lenders want the fund to keep a cash buffer after settlement |
On top of the deposit, budget for stamp duty, legal fees, the bare trust deed, valuation and lender fees. We can run the numbers with you on a free call.
Can I use a related-party loan?
Yes, members can lend to their own SMSF, but the ATO expects the loan to be on terms consistent with its safe harbour guidelines (interest rate, LVR, term, security). Get this wrong and income can be taxed at the top rate. For most people a third-party lender is simpler.
Choosing a lender
The big four banks have largely stepped away from SMSF lending, so the market is mostly specialist banks and non-bank lenders. Policies differ widely on LVR, minimum fund balance, property type, location and whether the tenant is related. A broker who works this niche can match your deal to the lenders likely to approve it — and avoid unnecessary credit enquiries.
Your team
A good SMSF commercial purchase usually involves an SMSF accountant or adviser, a solicitor (for the bare trust, lease and contract) and a broker. We work alongside your existing advisers or can introduce you to ones who know this area.