Tax Benefits of Buying Your Office or Warehouse Through Super

Buying your own office or warehouse through your Self Managed Super Fund (SMSF) not only gives move control for business owners—it can also unlock a suite of tax efficiencies and long-term wealth benefits. In this guide, we’ll explain how purchasing commercial property through super works as well as the tax benefits.

What does buying commercial property through an SMSF help you achieve?

If you're a business owner, your SMSF can acquire commercial property—even from your own business—provided it complies with superannuation law. This includes buying your business premises and leasing it back to your own entity under a formal lease agreement at market rates.

This structure allows you to:

• Claim deductions for rent in your business
• Direct rental income into your super
• Achieve asset protection from external creditors
• Grow SMSF assets within a tax-effective environment

Rental Income and Assessable Income

When your SMSF owns the property, any rental income your business pays becomes assessable income for the fund. In accumulation phase, this is generally taxed at just 15%. Once you transition to retirement phase, that tax rate could drop to 0%—making this a powerful vehicle for retirement savings.

Meanwhile, the rent paid is a business expense for your trading entity—an allowable deduction that reduces your overall income tax bill.

Key Tax Benefits

1. Tax Deduction for Rent Paid

The rent your business pays is a tax-deductible business expense, reducing your assessable profits.

2. Low Tax on Rental Income

Rental income received by the SMSF is taxed at 15% in accumulation phase and may become tax-free in pension phase.

3. Capital Gains Tax Discount

If your SMSF sells the commercial property after 12 months, it receives a 33% CGT discount, bringing the effective rate to 10%. In pension phase, capital gains can be entirely tax-free.

4. Tax-Free Environment at Retirement

As part of your retirement benefits, all income—including rental and gains—can be received tax-free when your SMSF enters the pension phase.

Limited Recourse Borrowing Arrangement (LRBA)

If your SMSF doesn’t have enough cash to fund a commercial property purchase outright, it can borrow money using a limited recourse borrowing arrangement.

Under an LRBA:

• A separate bare trust holds the title
• The lender only has access to the single acquirable asset (the property)
• Your SMSF retains protection over other fund assets

Borrowing must align with your fund’s investment strategy, and repayments must come from SMSF assets, contributions, or rental income.

Legal & Compliance Considerations

To stay compliant with superannuation laws, the setup must meet strict requirements:

• Lease must be commercial lease on arm’s length terms
• You must pay rent on time at market rates
• The investment must produce or be expected to produce assessable income
• The SMSF must be allowed to hold business real property per the trust deed

Associated legal fees, stamp duty, capital expenses, and ongoing expenses should be factored into your investment strategy.

Example: Jane Buys Her Warehouse Through Super

Jane, a sole trader running a distribution business, has $300,000 in her SMSF. She finds a $750,000 warehouse she wants to operate from. Her SMSF sets up an LRBA to borrow $450,000 and buys the property via a bare trust.

Her business pays $48,000 annual rent to the SMSF (on market terms).

That rent is:

• A deductible expense for the business
• Assessable income for the SMSF (taxed at 15%)
• Used to meet loan repayments

Down the track, when Jane retires and enters pension phase, her SMSF pays zero tax on the rental income.

Asset Protection and Control

Unlike leasing from a third party, buying the business property through your SMSF gives you long-term control over your premises. If structured properly, it also provides a layer of asset protection, shielding the property from creditors of your trading entity.

What are the Costs to Consider?

• Legal expenses: SMSF trust deed amendments, corporate trustee setup, LRBA legal advice
• Stamp duty: Varies by state and may apply twice (to the bare trust and SMSF)
• Bank fees: Higher under LRBAs than standard property loans
• Capital expenses: Fit-outs or improvements are not immediately deductible
• Ongoing expenses: Property management, insurance, accounting

Building a Long-Term Investment Strategy

Your SMSF should document how this investment fits your fund’s investment strategy.

You should consider:

• Liquidity: can your SMSF meet expenses and contributions caps?
• Risk: is property concentration a concern?
• Growth potential: will the commercial property investment outperform other options?

Can I Transfer an Existing Property?

Yes—if you already own a business premises, it may be possible for your SMSF to acquire the commercial property from you, under strict conditions. This must be done at market value and may trigger capital gains and stamp duty, although small business CGT concessions might apply.

Final Thoughts

Buying your own commercial property through your Self Managed Super Fund can unlock significant tax benefits, provide long-term retirement savings, and give you more control over your business premises. But this strategy is complex. It requires careful planning, strong compliance, and expert support from an accountant, broker and potentially a financial planner.