SMSF Commercial Property Loan

A SMSF commercial property loan lets a self-managed super fund (SMSF) borrow to buy commercial property it can’t fund outright from existing member balances. The mechanics are quite different from a standard commercial loan: the fund borrows under a limited recourse borrowing arrangement (LRBA), the property is held in a separate bare trust until the loan is repaid, and every part of the transaction has to satisfy superannuation law as well as standard lender credit policy.

That second layer is what makes commercial SMSF loans a specialist category. The major banks progressively withdrew from SMSF lending in the 2015 to 2019 period, with most exits concentrated in 2018, leaving the market to a tighter panel of specialist commercial lenders, second-tier banks and non-bank funders who actively underwrite LRBAs. While AMP Bank re-entered residential SMSF lending in early 2026, the commercial SMSF market remains the domain of these specialist lenders. Each has its own appetite for owner-occupier versus investment scenarios, related-party leases, fund size and trustee structures.

At Loanworx, we arrange SMSF commercial property loans for trustees buying their own business premises, acquiring arm’s-length investment property, or refinancing an existing LRBA. As a specialist finance broker in Melbourne, we work alongside your accountant and SMSF adviser so the loan structure, the fund structure and the property structure all line up before any contract is signed.

Looking at a practice premises purchase, an arm’s-length investment, or refinancing an existing SMSF loan? Call us on 1300 562 696 or get in touch and we’ll be back to you shortly.

How an SMSF Commercial Property Loan Works

An SMSF commercial property loan isn’t structured like a standard commercial loan. Because superannuation law restricts what an SMSF can do with borrowed money, the loan has to be wrapped inside a specific arrangement that ring-fences the lender’s recourse to the property itself. Here are the moving parts.

Limited recourse borrowing arrangement (LRBA)

A limited recourse borrowing arrangement (LRBA) is the borrowing structure SMSFs use to acquire property under section 67A of the Superannuation Industry (Supervision) Act 1993. The limited recourse part is the key feature: if the loan defaults, the lender’s recovery is limited to the specific property held under the arrangement. The lender cannot pursue other assets of the SMSF, which protects the rest of the fund’s balance from a single bad deal. That limited recourse is also why SMSF loan-to-value ratios (LVRs) are typically tighter and rates sit a little higher than equivalent standard commercial lending.

Bare trust and holding trust structure

The property cannot sit directly on the SMSF’s balance sheet during the loan. Instead, a separate bare trust (often called a holding trust or custodian trust) is established to hold legal title while the loan is on foot. The SMSF holds the beneficial interest, receives the rent, makes the loan repayments, and acquires legal title once the loan is repaid. The bare trust needs its own trust deed, its own trustee (usually a corporate trustee separate from the SMSF’s trustee), and its own ABN in some cases. Getting this wrong is one of the most common sources of compliance grief after the fact.

Single acquirable asset rule

An LRBA can only fund the purchase of a single acquirable asset, defined under the Act. For commercial property, that usually means a single title or a single contractually unified parcel. Buying two strata-titled suites on separate titles, for example, would typically require two separate LRBAs (and two separate bare trusts) rather than one combined loan, unless the contracts preclude either from being sold individually. The implications matter at structuring time, and we walk you through this before any offer goes in.

What borrowed money can fund

Under an LRBA, borrowed money can fund the purchase, repairs and maintenance of the asset. It generally cannot fund renovations or improvements that fundamentally change the nature of the asset, for example knocking down a small warehouse to build a multi-unit complex. Substantial improvements that change the character of the asset usually need to be funded from existing SMSF cash, not borrowings.

Owner-Occupier Premises vs Arm’s-Length Investment

There are two main scenarios where an SMSF commercial property loan makes sense, and they’re treated quite differently by lenders. The line between them comes from the superannuation concept of business real property, not from the lender’s underwriting.

Buying the premises your own business operates from

This is probably the scenario you have in mind. The SMSF buys the premises and leases them back to the operating business (typically owned by the same members or a related party) at arm’s-length commercial rent. Under super law, this is permitted because the property qualifies as business real property: real property used wholly and exclusively in one or more businesses. For lenders this is generally the more comfortable scenario. The tenant is known, the lease is on terms the trustees control, and the rent reliably matches the repayment schedule. LVRs of up to 80% are commonly available, with some specialist lenders going higher for well-qualified scenarios.

Buying commercial property leased to a third party

The SMSF buys commercial property and leases it to a genuinely unrelated tenant. This is closer to standard commercial property investment loans, just structured inside an SMSF. Lenders assess the lease, the tenant covenant and the asset much the same way as a standard investment loan, but apply tighter LVRs because of the LRBA structure. Typical LVRs sit at 65% to 75% depending on asset class, lease strength and the fund’s overall position. The property needs to be commercial in nature, meet the fund’s investment strategy, and be acquired and leased on commercial terms.

Property an SMSF generally cannot buy

A few things sit outside what an SMSF commercial property loan can support. The fund generally cannot acquire commercial property from a related party at less than market value. It generally cannot lease commercial property to a related party on non-commercial terms (rent below market rate, no formal lease, missed payments accepted). And it generally cannot acquire residential property from a related party at all, even at market value, except in very limited circumstances. These restrictions catch out anyone who assumes the rules are similar to running an investment property outside super.

Not sure whether your scenario sits on the owner-occupier or investment side of the line? Call us on 1300 562 696 and we’ll talk it through before you commit to a structure.

SMSF Commercial Property Loan Eligibility

Lenders in the SMSF commercial space assess the fund first, the property second, and the members’ wider position third. Eligibility comes down to whether the fund is set up correctly, whether it can service the loan, and whether the property fits within the fund’s investment strategy. Here’s what most lenders look at.

Correctly established SMSF and bare trust

The SMSF needs to be a complying fund with an Australian Business Number (ABN), a current trust deed that permits borrowing, and a corporate trustee in most cases (individual trustees are allowed, but several lenders prefer or require a corporate trustee for LRBAs). The bare trust must be in place before settlement, and sometimes before a contract is executed, with its own trustee, deed and ABN where required.

Written investment strategy that accommodates the purchase

Under super law, SMSF trustees must have a documented investment strategy that addresses diversification, liquidity, risk and the ability to meet member benefits. A commercial property acquisition financed through an LRBA needs to fit that strategy, or the strategy needs to be updated to reflect the new asset and the gearing involved. Lenders increasingly ask to see the investment strategy as part of the application.

Sufficient fund balance after the deposit

Most lenders want to see a meaningful balance remaining in the SMSF after the deposit, stamp duty and acquisition costs are paid out. This isn’t always a hard threshold, but as a working guide, lenders generally prefer to see 10% to 20% of the property value retained in the fund as a liquidity buffer. A fund that empties itself to settle the deposit and then has nothing left to absorb a vacancy or repair raises serviceability concerns.

Contribution capacity from members

Even when lease income covers the bulk of the repayments, lenders look at whether members can top up the fund through concessional or non-concessional contributions if rent gaps appear. A fund where members are still in accumulation phase and can contribute reliably is generally a stronger application than a fund already in pension phase with no contribution flexibility. Some lenders can also take into account future contributions where the capacity to make them is demonstrated.

Personal guarantees from members

Most SMSF commercial property loans require personal guarantees from the members. The guarantee is itself limited recourse in most cases, but lenders still credit-check the members and consider their personal position, employment income and existing liabilities as part of the assessment. These are typically taken to ensure member contributions continue to the fund, as is often required for serviceability purposes.

How Lenders Assess Your SMSF

Inside the eligibility checks, lenders apply credit metrics specific to SMSF lending. These are the factors that tend to weigh most heavily when a fund applies for a commercial property loan.

Liquidity buffer after acquisition

The single biggest factor lenders focus on. A fund holding $400,000 in cash and shares after settling on a $1.2 million property is in a different position from one left with $50,000. The buffer needs to be enough to cover a few months of loan repayments, a vacancy period, and reasonable property expenses without forcing emergency contributions or asset sales.

Net rent against the repayment schedule

For owner-occupier scenarios, the rent is set by the trustees within market range, but it has to be commercial. For arm’s-length investments, the rent is whatever the market lease produces. Either way, lenders model net rent (after recoverable and non-recoverable outgoings) against the loan repayment on both an interest-only and principal-and-interest basis. A debt service coverage ratio of around 1.2 to 1.4 times is a common starting benchmark.

Contribution history and capacity

Two or three years of regular contributions tell a lender the fund has reliable inflows to support gearing. Lumpy or sporadic contributions, or no contributions at all in recent years, can prompt more scrutiny. Where members are approaching the contribution caps, lenders may model how much additional contribution capacity remains.

Concentration risk within the fund

A fund where the commercial property represents 90% of total assets is more concentrated than one where it represents 50%. Some lenders cap how concentrated they’re willing to see the fund become post-settlement, particularly for specialised or higher-risk asset classes. Diversification across the fund matters even when the loan only touches one asset.

Member age and time to pension phase

Members closer to pension phase face additional considerations. Once the fund moves into pension phase, the cash flow profile changes, and the ability to make contributions becomes more limited. Some lenders factor this in, particularly on longer-term loans where a meaningful portion of the term sits past retirement.

Read More: Typical LVRs and Loan Terms for SMSF Commercial Property

Typical SMSF Commercial Property Loan Terms

Every SMSF commercial loan is priced individually within the specialist panel. The table below gives a working guide to what’s commonly available, though the specific terms for your fund will depend on the property, the lease, the fund’s position and current market conditions.

Scenario	Typical maximum LVR (industry guide)	Typical loan term (industry guide)
Owner-occupier business premises	Up to 80%, occasionally higher with select specialists in qualifying scenarios	Up to 25 to 30 years
Arm’s-length commercial investment (office, retail, industrial)	Up to 65% to 75%	Up to 25 years
Specialised commercial property (medical, childcare, hospitality)	Typically 50% to 65%	Up to 20 years
Lease-doc SMSF commercial loan	Typically up to 65% to 70%	Up to 25 years
SMSF commercial loan refinance	Subject to current LVR position	Remaining term of original LRBA

This is a general industry guide, not a commitment. The specific LVR, term and rate available to your fund will depend on the property, the lease, the fund and current market conditions. Call us on 1300 562 696 and we’ll come back with terms tailored to your scenario.

Refinancing an Existing SMSF Commercial Loan

Many SMSFs took out commercial property loans when the major banks were active in the market. After the majors exited, those loans moved onto run-off books or were transferred to specialist successor lenders, often on terms that no longer reflect current market pricing. If your loan hasn’t been reviewed in several years, there’s a reasonable chance the rate, the LVR position or the structure can be improved.

The original lender has exited or wound back SMSF lending

If your loan sits with a lender that no longer actively writes new SMSF commercial loans, you may be paying back-book pricing while new applicants get sharper rates elsewhere. Refinancing into a lender still actively competing in the space often produces a meaningful rate saving.

The fund has built equity in the property

Several years of repayments and any capital growth in the property mean your LVR has typically reduced. A lower LVR can unlock a better rate band at refinance, even with the same lender.

The interest-only period has ended or is about to end

Many SMSF commercial loans were written on interest-only terms that have since converted, or are about to convert, to principal-and-interest. Refinancing at that point can reset the term, re-establish interest-only where appropriate, and reprice the loan.

The fund holds multiple properties under separate LRBAs

Where the fund holds more than one commercial property under separate LRBAs, refinancing can sometimes simplify the structure or improve overall pricing, though each LRBA still needs its own loan and bare trust. We model the trade-off carefully before recommending any change.

Compliance Traps We Help You Avoid

Most SMSF commercial property deals that go sideways don’t fail because the property was bad. They fail because something in the structure breached super law and only got picked up at audit or at refinance. These are the issues we’ll help you navigate before settlement.

Acquiring residential property from a related party

An SMSF generally cannot acquire residential property from a related party, even at full market value, outside very limited exceptions. A common assumption is that paying market price makes the transaction acceptable. It usually doesn’t, and the consequences can be severe. Commercial property used as business real property is the main exception, which is why owner-occupier business premises is the most common SMSF property acquisition.

Breaching the sole purpose test

Every transaction the SMSF undertakes must be for the sole purpose of providing retirement benefits to members. A commercial property where a member also gets personal use beyond commercial lease arrangements (storage of personal items, use outside business hours, family events) can create sole purpose test issues. The line is firmer than you might expect.

Funding improvements that change the character of the asset

An LRBA can fund repairs and maintenance, but cannot fund improvements that fundamentally change the asset’s character. Even where SMSF cash (rather than borrowed money) is used for renovations, care is needed to ensure the work doesn’t push the property into different asset territory under Australian Taxation Office (ATO) rulings. That can trigger the LRBA to fail, with significant tax consequences. We’ll flag this risk early if you’re considering anything beyond like-for-like repairs.

Documenting the related-party lease incorrectly

When the SMSF leases premises back to a related operating business, the lease must be on arm’s-length commercial terms. Common failures include not having a written lease in place, setting rent below market without independent evidence, skipping scheduled rent reviews, or accepting missed payments during business downturns. Each of these can trigger compliance issues.

Confusing the SMSF trustee and the bare trust trustee

The SMSF has its own trustee. The bare trust holding the property has its own separate trustee, and normally there is one bare trust per property acquired. These are not the same legal entity in most setups, and the documentation, bank accounts and contracts need to reflect that. Errors in which entity signs which document can cause settlement delays and, in some cases, void contracts.

Why SMSF Trustees Work With Loanworx

The commercial SMSF loan market sits with a tight panel of specialist lenders, second-tier banks and non-bank funders, each with their own appetite for owner-occupier versus investment, related-party leases, fund size and asset class. Going direct to one of them means seeing one credit policy. Finding the right fit from the start matters, both for approval odds and to avoid unnecessary credit enquiries on your file.

We work the specialist SMSF lender panel daily

We know which lenders are currently active in commercial SMSF lending, which prefer owner-occupier scenarios, which are comfortable with related-party leases at arm’s length, and which have appetite for specialised assets like medical or childcare. That positioning saves the application going to a lender who would have said no on policy alone.

We coordinate with your accountant and SMSF adviser

SMSF lending doesn’t sit cleanly inside any single profession. The accountant runs the fund financials, the SMSF adviser handles strategy, the solicitor sets up the bare trust, and the broker arranges the loan. We expect to work with all of them and consider it part of the job, not a complication. Coordinating these moving parts is often where SMSF deals get complicated, and where we step in to help.

We disclose how we’re paid upfront

For most SMSF commercial property loans, Loanworx is paid an upfront and trail commission by the lender after settlement. The commission typically does not change the rate or fees you pay. For most SMSF scenarios, due to the added complexity, a fee for service will apply, and we’ll disclose this in writing before any work begins. No surprises.

Our SMSF Commercial Loan Process

Arranging a commercial SMSF loan tends to involve more parties than a standard commercial loan, so the process is more sequenced. Here’s how we’ll work with you.

Initial conversation and fund review

We sit down with you, review the SMSF’s current structure, trust deed, member balances and existing investments, and discuss what you’re looking to buy. We’ll also flag if anything in the fund needs to be addressed before an application can proceed, so you can seek professional advice. No cost, no obligation.

Structure and bare trust coordination

If a bare trust isn’t already in place, we coordinate with your solicitor and SMSF adviser to make sure it’s set up correctly before exchange of contracts. The structuring conversation includes which entity will be the bare trust trustee, which will be the SMSF trustee, and how the lease back to your business (if applicable) will be documented.

Lender shortlist and pre-assessment

We assess your fund and the proposed property against the active SMSF commercial lender panel, shortlist the lenders most likely to approve at the strongest terms, and run any pre-assessment conversations needed before formal lodgement.

Application, approval and settlement

We prepare and lodge the credit submission, including the fund’s investment strategy, contribution history, liquidity analysis, lease commentary (for related-party scenarios) and any structural detail the lender needs. We liaise with the lender, your solicitor, the bare trust trustee and your SMSF adviser through to settlement.

Ongoing review and refinance flagging

SMSF lending is one of the areas where back-book pricing drift is most pronounced. We check in periodically so your facility still suits the fund, and flag refinance or restructure opportunities when the market shifts.

Frequently Asked Questions (FAQs)

What kinds of commercial property can my SMSF buy under an LRBA?

Any commercial real property that fits the fund’s investment strategy and complies with super law. Common examples include office suites and floors, strip-shop retail, warehouses and industrial units, medical suites, childcare premises and other specialised commercial assets. The property needs to be commercial in nature, acquired and leased on arm’s-length terms, and held in a bare trust until the loan is repaid. Residential property generally cannot be acquired from a related party, and mixed-use property with a significant residential component needs to be assessed carefully.

Can my SMSF buy the premises my business already operates from?

Yes, if the property qualifies as business real property under super law (real property used wholly and exclusively in one or more businesses). The SMSF acquires the premises at market value, then leases them back to your operating business at arm’s-length commercial rent under a written lease with regular reviews. The transaction is one of the limited circumstances where an SMSF can acquire property from a related party, and it’s the most common reason small business owners use SMSF commercial property loans.

How much can my SMSF borrow to buy commercial property?

It depends on the scenario. For owner-occupier business premises, LVRs of up to 80% are commonly available, with some specialist lenders going higher for qualifying scenarios. For arm’s-length commercial investment property, LVRs typically sit at 65% to 75%. Specialised assets (medical, childcare, hospitality) usually attract lower LVRs of 50% to 65%. The fund also needs to retain a sensible liquidity buffer after the deposit, stamp duty and acquisition costs, which often becomes the binding constraint rather than the headline LVR.

Why are SMSF commercial loan rates higher than standard commercial loans?

Because the limited recourse structure caps the lender’s recovery to the single property held under the LRBA. The rest of the fund’s assets are off limits. From the lender’s perspective, that’s a tighter security position than a standard commercial loan where they could pursue other business assets in a default. The pricing tends to reflect that limited recourse, often running materially higher than equivalent standard commercial pricing depending on the lender and the scenario.

Do I need a corporate trustee for my SMSF to get a commercial property loan?

Not strictly, but most lenders strongly prefer it for LRBAs, and some require it outright. A corporate trustee makes the fund cleaner to administer, simpler when members change, and easier to reference in loan documentation. If your SMSF currently has individual trustees, switching to a corporate trustee before applying often makes the application materially easier and may open up lenders that wouldn’t otherwise consider the fund.

Can my SMSF improve or develop the property using borrowed money?

Generally no. Borrowed money under an LRBA can fund the acquisition, repairs and maintenance, but cannot fund improvements that fundamentally change the character of the property. Adding a mezzanine floor or converting a warehouse to medical suites, for example, may push the property into a different asset under ATO rulings, which can cause the LRBA to fail. Improvements of this kind typically need to be funded from existing SMSF cash, and the line between repair and improvement is one we walk through carefully before any works are commissioned.

What happens to the loan when a member retires or enters pension phase?

The loan continues, but the fund’s cash flow profile changes. In pension phase, the fund pays out pensions to members, contribution capacity becomes more limited, and rent income from the commercial property becomes a more central part of meeting pension payments. Some lenders factor proximity to pension phase into the loan term and the serviceability assessment. Refinancing or restructuring around the transition into pension phase is something we’ll flag with you as part of ongoing review.

Can I refinance my existing SMSF commercial loan if the original lender has exited the market?

Yes, and this is one of the more common scenarios we see. Several major banks exited new SMSF lending between 2015 and 2019, leaving existing borrowers on run-off books that often don’t reflect current pricing. Refinancing into the active specialist commercial SMSF lender market can produce meaningful rate savings, reset interest-only periods, or simplify the structure. We assess whether the saving justifies the refinance cost before recommending any move.

How long does an SMSF commercial property loan take to settle?

Straightforward owner-occupier business premises scenarios with a clean fund and pre-existing bare trust can settle in six to eight weeks. Scenarios involving new bare trust setup, specialised assets, or related-party lease documentation typically take eight to 12 weeks because of the additional legal and SMSF adviser coordination required. We’ll give you a realistic timeline upfront and flag anything that could slow it down.

Do I need an accountant and SMSF adviser involved, or can I do this through the broker alone?

You’ll need an accountant and SMSF adviser involved. SMSF commercial property lending sits at the intersection of finance, tax and superannuation law, and no single profession covers all of it. We arrange the loan, your solicitor sets up the bare trust, your accountant administers the fund, and your SMSF adviser handles strategy. If you don’t have an SMSF adviser in place, we can point you to trusted professionals from our network. Going ahead without them isn’t a shortcut we’d recommend.

Ready to Talk About Your SMSF Commercial Property Loan?

If you’re a trustee looking at buying business premises through your SMSF, acquiring an arm’s-length commercial investment, or reviewing an existing LRBA that hasn’t been touched in a few years, we can help you map out what’s possible inside the current specialist lender market. The earlier the structure is set, the cleaner the path to settlement.

Call us on 1300 562 696 or book a free, no-obligation chat with the Loanworx team. We work with SMSF trustees across metropolitan Melbourne and the surrounding suburbs, alongside your accountant and SMSF adviser.

Disclaimer: The information provided here is general in nature and should not be considered as financial advice. You need to consult your professional advisors such as your accountant, solicitors and financial planner or wealth manager to see if a strategy to invest in this way is suitable for you, ahead of a discussion with us which will be limited to how to arrange any funding required.