Most business owners pay rent to a landlord. Some pay rent to their own superannuation fund instead, because the fund owns the building. The rules allow it, the tax treatment is generous, and it is one of the few ways the law lets your super and your business work together. It is also easy to get wrong, and it genuinely does not suit everyone. Here is how it works, what it costs, and who should walk past it.
How it works: your business pays rent to your own fund, and the fund pays 15 per cent tax
Superannuation law generally bans your fund from buying assets from you or leasing assets to you. Business real property is the exception. Premises used wholly and exclusively in a business, a shop, a warehouse, a clinic, a workshop, can be bought by your self managed super fund, even from you personally, and leased back to your business.
The lease has to look exactly like a lease with a stranger. Market rent, set by evidence, paid on time, under a written agreement, with reviews. And if net leases are the norm for that type of property, as they usually are in commercial, the business pays the outgoings too, council rates, building insurance and maintenance on top of rent, just as it would for any landlord. Your business claims the rent as a deduction at your tax rate. The fund receives it and pays a maximum of 15 per cent on the net income.
Hold the property more than 12 months and capital gains inside the fund are taxed at an effective 10 per cent. Once the fund begins paying you a retirement phase pension, income and gains on the assets supporting that pension can become tax exempt, with the exempt share depending on the fund’s mix of pension and accumulation money and the transfer balance cap.
If the fund cannot pay cash, it can borrow under a limited recourse borrowing arrangement. The property sits in a separate holding trust, and the lender’s claim against the fund is limited to that property, though lenders commonly ask the members for personal guarantees on top. One recent change matters here: for new LRBAs caught by the rules from 10 August 2026, the property acquired must qualify as business real property, so genuine business premises are now one of the main uses left for a new SMSF property loan. Existing loans and some refinancing are protected by transitional rules.
Run the numbers on an $800,000 warehouse. The fund puts in $320,000 of existing super and borrows $480,000 at an illustrative 7.7 per cent. Your business pays market rent of $56,000 a year and covers the outgoings under a standard net lease. After roughly $37,000 of interest, the fund keeps about $19,000 before its running costs and pays tax at 15 per cent, so under $3,000. Earn the same $19,000 personally at the top marginal rate and up to 47 per cent of it goes to tax. And every rent payment your business was already going to make is now building your retirement position instead of your landlord’s.
What it costs: stamp duty as normal, dearer borrowing, and running costs every year
Nothing about the structure removes the ordinary costs of buying commercial property. On that $800,000 warehouse in Victoria, stamp duty at the usual rates is about $43,000. Victoria adds a wrinkle worth knowing: commercial and industrial property is moving from stamp duty to an annual property tax. The first qualifying sale since July 2024 brings a property into the new system and still attracts duty one final time. Later sales can be duty free, and the annual tax only begins ten years after the property enters. So before budgeting for duty, check whether the building is already in the system. Land tax also belongs in the annual budget. Commercial land has no main residence exemption, a complying super fund is assessed at Victoria’s general rates rather than the higher trust surcharge, and land tax keeps running during the transition, so a property can eventually carry both it and the new annual tax. Whether any of it can be recovered from the tenant depends on the lease and the legislation covering that type of premises. On top sit the structure costs: establishing the fund with a corporate trustee, the holding trust and loan documents for the borrowing, legal review of the lease, a market rent valuation and conveyancing. None of it is optional, and all of it arrives before you settle.
The borrowing itself costs more than a standard commercial loan. Lenders price limited recourse loans above conventional property lending and typically cap the loan at 65 to 75 per cent of the value, so the fund needs a genuine deposit and real liquidity left over after settlement. Once you own it, the fund carries its own running costs every year: administration, the independent audit, periodic valuations, and rent reviews to keep the lease at market.
GST deserves a line of its own. Buying the premises as a going concern, with a lease in place, both parties registered and the contract documenting it properly, can be GST free, while buying vacant premises usually means GST on top of the price, which a registered fund claims back. Once the fund owns the building, it registers for GST if the rent tops $75,000 a year and adds GST to the rent, and a GST registered business generally claims that straight back each quarter. The net cost is usually nothing, but the paperwork is real and the contract wording at purchase has to be right, because fixing it afterwards is expensive.
These costs matter because they set a floor. Spread them across a small purchase and the drag can swallow the tax benefit. The structure rewards scale and patience.
Who it should not tempt: funds that would end up with one asset, and owners who may need the deposit back
The clearest warning sign is concentration. A couple with $350,000 of combined super buying an $800,000 property ends up with a geared fund holding one asset with one tenant, and the tenant is their own business. If the business hits a bad year, the rent is under pressure at exactly the moment the fund’s only asset depends on it. Diversification is not a slogan here, it is the difference between a rough year and a wrecked retirement.
The second is liquidity. Money that goes into super stays there until a condition of release, usually retirement. If your business might need that deposit back for stock, staff or survival, the fund cannot hand it over, and the law will not bend because times are tight. The fund also cannot help by charging your business convenient rent instead of commercial rent. Below market leaks fund money to the business, above market pushes money in through the back door, and either can see the fund’s income taxed under the punitive non arm’s length rules at 45 per cent.
The third is timing. Owners close to retirement need their fund to pay pensions in cash. A fund that is mostly one building can only pay out what the rent brings in, and selling a commercial property to free up cash is slow and lumpy. If you are inside ten years of stepping back, the exit plan for the building matters as much as the purchase.
This is a structure decision before it is a property decision, and it deserves your adviser, your accountant and your lawyer in the same conversation before contracts are signed. Get it right and the rent you were already going to pay spends the next 20 years quietly funding your retirement. Get it wrong and you have locked your working capital in a vault you cannot open.
This article is general information only and does not take into account your objectives, financial situation or needs. Consider whether it is appropriate for you and seek personal advice before acting. Build MyWealth (Accounting Cloud Pty Ltd) is a Corporate Authorised Representative (No. 1306106) of Lifespan Financial Planning Pty Ltd, AFSL 229892.
