By Jaye Mankelow


For many business owners, owning their premises is more than just a financial goal; it’s a strategic move that provides control, stability, and long-term wealth creation.

One popular and tax-effective way to achieve this is by leveraging a Self-Managed Superannuation Fund (SMSF). This strategy allows business owners to save for and purchase their commercial or business property within their SMSF.

It offers numerous advantages, from tax benefits to enhanced control over the premises and increased business value.

Here’s how the strategy works, the benefits it provides, and key considerations for business owners.

How the Strategy Works

  1. Super Contributions and Rollovers: Business owners contribute to their SMSF, often at concessional tax rates, and can also roll over existing balances from industry or retail funds to build their SMSF’s total funds. This consolidates their superannuation assets under one structure, maximising their ability to purchase property.
  2. Property Purchase Within the SMSF: Once the SMSF has sufficient funds, it can purchase a commercial property outright or use a Limited Recourse Borrowing Arrangement (LRBA) to borrow funds for the purchase.
  3. Leaseback to the Business: The SMSF leases the property back to the owner’s business at market rates, creating a reliable income stream for the SMSF and providing the business with a secure and familiar premises.

Key Benefits of the Strategy

1. Tax Advantages

  • Concessional Tax Rates: Super contributions are taxed at just 15%, significantly lower than most personal or business tax rates, allowing for efficient accumulation of funds.
  • Rental Income Taxation: Rental income received by the SMSF is taxed at 15% in the accumulation phase and becomes tax-free in the pension phase.
  • Capital Gains Tax (CGT) Benefits: If the SMSF sells the property during the pension phase, no CGT is payable, which can lead to substantial savings when exiting the investment.

2. Control and Stability

  • Confidence in the Tenant: Leasing the property back to the business provides stability for the SMSF, as the owner has control over ensuring rent is consistently paid. This eliminates the uncertainty of dealing with unknown tenants.
  • Long-Term Security: Owning the property through the SMSF ensures the business isn’t at risk of lease non-renewal or rent hikes from external landlords.

3. Enhanced Financial Flexibility

  • Freeing Up Personal Capital: By purchasing the property through the SMSF, personal funds can be directed toward other goals, such as paying off a home loan or pursuing alternative investments.
  • Strategic Wealth Accumulation: This strategy consolidates the business owner’s efforts toward wealth creation, combining business stability with retirement planning.

4. Increased Business Value

  • Goodwill Enhancement: Owning the premises can improve the goodwill of the business, particularly when it comes time to sell. A buyer may value the stability and control that comes with an owner-occupied property.
  • Sale Flexibility: When the business is sold, the premises can remain in the SMSF and leased to the new owner, providing a stable income stream for the SMSF. Alternatively, the SMSF can sell the property for capital gains tax-free if in the pension phase.

Key Considerations

While this strategy offers significant benefits, business owners must ensure they meet compliance requirements and understand the associated risks:

  1. Market Rent Compliance: The SMSF must charge and receive market rent for the premises to meet superannuation rules.
  2. Liquidity and Diversification: Investing heavily in one property can reduce the SMSF’s diversification and liquidity. The SMSF must have sufficient funds to meet other obligations, such as pension payments or expenses.
  3. Borrowing Restrictions: Using an LRBA requires adherence to strict borrowing rules, including limited recourse in case of default.
  4. Professional Advice: Engaging with financial planners, accountants, and legal advisers ensures the strategy aligns with both business and personal goals while meeting regulatory requirements.

Realising Business and Retirement Goals

For business owners, saving for and purchasing business premises through an SMSF offers a powerful combination of tax efficiency, financial control, and retirement planning. It provides security for the business and enhances long-term wealth creation.

By leveraging superannuation contributions, rollovers from existing funds, and strategic property purchases, business owners can achieve financial flexibility, secure their premises, and even free up personal capital for other investments.

With proper planning and professional advice, this strategy ensures business stability while building a secure retirement future.

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