SMSF Commercial Property Loan Requirements

An SMSF commercial property loan lets a self-managed super fund (SMSF) borrow to buy business premises through a limited recourse borrowing arrangement (LRBA). Before you approach a lender, check that the property and any related tenant meet the business real property rules. The lender then tests whether rent, contributions and the fund’s spare cash can carry the repayments.

Since 10 August 2026, a new LRBA can finance real property only if it’s business real property. The Australian Taxation Office (ATO) says the property must stay business real property for as long as the loan runs. The use you classify before lodgement has to hold for the whole loan term.

Identify the Property and Tenant

Start an SMSF commercial loan by testing two things: whether the property is business real property, and whether the tenant is a related party of the fund. The answers decide whether the fund can borrow for the purchase and what the lease must look like.

Business real property generally means land and buildings used wholly and exclusively in one or more businesses. That’s the definition on the ATO’s SMSF investment restrictions page, last updated 16 September 2025.

Business real property is an exception to two related-party rules. A fund can buy it from a member at market value. The fund can also lease it to a member’s business without the lease counting against the 5% in-house asset limit.

The test looks at how the land is used, not at its zoning. The ATO’s business real property ruling, SMSFR 2009/1, accepts a minor or insignificant non-business use. Business use that lasts only around the time of the purchase doesn’t count, because the ATO looks at how the property is used before and after the sale.

Related-Party Tenants

A related party includes each fund member, their relatives and any company or trust that a member or their associates control. A lease from the fund to the members’ own trading company is therefore a related-party lease. The ATO requires that lease to be on an arm’s length basis at market rent.

Business use by a related tenant is allowed. The ruling’s first example is a sale and leaseback, where members sell their vineyard to their fund and lease it back for their own business. The related-party exception holds only while the property stays business real property and the lease stays on market terms.

A Hypothetical Premises Purchase

This fictional example runs through the rest of the page. Leah and Tom own Marlow Engineering Pty Ltd, a metal fabrication business that rents its workshop from an unrelated landlord. They’re the only members of the Marlow Super Fund, and their company Marlow Super Pty Ltd is its trustee.

The fund plans to buy a $1,400,000 warehouse on a single title from an unrelated vendor, who runs a business there until settlement. Marlow Engineering will move in at settlement under a written lease. The table shows each party’s role and its relationship to the fund.

Party	Role in the purchase	Relationship to the fund
Marlow Super Pty Ltd, trustee of the Marlow Super Fund	Borrows, pays the deposit from fund assets and receives the rent	The borrower
Marlow Property Pty Ltd, trustee of the holding trust	Holds legal title to the warehouse for the fund until the loan is repaid	A related trust, covered by the LRBA in-house asset exception
The lender	Lends to the fund trustee and takes a mortgage over the warehouse	Unrelated, with its recourse limited to the warehouse
Marlow Engineering Pty Ltd	Leases the warehouse and pays rent to the fund	A related party, because Leah and Tom control it
Leah and Tom	Fund members, directors of both trustee companies and directors of the tenant	Members of the fund

Money and title move in this order.

1. The fund pays the deposit and purchase costs from its own assets.
2. The lender advances the loan, and the holding trustee takes legal title to the warehouse.
3. Marlow Engineering signs a lease at the market rent and pays that rent each month.
4. The fund receives the rent and makes the loan repayments.
5. Once the loan is repaid, the fund can take legal title from the holding trustee.

The ATO’s guidance on how an LRBA works sets out this holding trust structure. It also says a discretionary trust can’t be the holding trust.

When to Seek Specialist Confirmation

Seek specialist confirmation once you’ve classified the use and the tenant relationship, and before you approach a lender. As the mortgage broker on a commercial SMSF loan, your job is the credit assessment: the lender, the loan amount and whether the fund can meet the repayments. Whether the warehouse is business real property, and whether the lease terms are arm’s length, are superannuation law questions.

For the Marlow purchase, ask the fund’s SMSF accountant or lawyer to confirm these points in writing.

• The vendor’s business use continues up to settlement.
• Marlow Engineering’s lease starts at settlement.
• Independent evidence supports the rent.
• The fund’s trust deed lets it borrow under an LRBA.

File the confirmation with your notes and refer to it in the application. Don’t state the structure’s tax compliance yourself.

Support the Rental Assumptions

A lender accepts the rent as a repayment source once you show a signed lease, independent evidence of market rent and proof that the tenant can pay. In the Marlow purchase, rent is the fund’s largest repayment source. Because the tenant is related, the lender wants evidence that the rent matches the market.

Check these lease terms before submission.

• The term and any options, compared with the loan term.
• The rent, its review method and the review dates.
• Who pays outgoings such as council rates, insurance and land tax.
• The permitted use, which needs to match the business the tenant runs.
• Any bond, bank guarantee or director’s guarantee behind the lease.

Get independent rent evidence, such as a valuer’s market rent assessment or a written appraisal from a commercial leasing agent. It shows the lender the rent can be replaced if the tenant leaves. It also gives the fund’s accountant evidence that the lease is on market terms.

Tenant Capacity and Vacancy Risk

Ask for the tenant’s last two years of financials and tax returns, plus current business activity statements. With a related tenant, the business that pays the rent often also pays the members’ wages and super contributions. A downturn in that business can cut both repayment sources at the same time.

If the tenant leaves, the lender’s security is an empty building. Ask the valuer to report the market value with vacant possession as well as the value subject to the lease, especially for a fit-out built around one business. A vacancy also affects super law: the property stays business real property while the fund looks for a new tenant, but not once the fund stops trying to lease it.

Lenders treat rent and contributions differently. As at October 2026, La Trobe Financial’s commercial SMSF page lists “80% Rental Income” and an SMSF contribution statement under its verification requirements. Liberty’s commercial SMSF page, as at October 2026, says its loan needs no minimum contributions and suits owner-occupiers.

Pepper Money’s SMSF loan page, correct as of 20 August 2026, accepts rental income and requires no liquidity test. It may also consider non-concessional contributions, subject to an affordability assessment based on the fund’s recurring income.

Stress Test: Vacancy and Lower Contributions

The Marlow Super Fund holds $900,000 before the purchase. It borrows $980,000, which is a loan-to-value ratio (LVR) of 70%, and pays the $420,000 deposit plus $90,000 of purchase costs from its own assets. That leaves $120,000 in cash and $270,000 in listed shares.

An independent valuer assesses the market rent at $98,000 a year, with the tenant paying outgoings. Leah and Tom each receive $30,000 of concessional contributions a year, under the $32,500 concessional contributions cap that applies from 1 July 2026. After 15% contributions tax, the fund keeps $51,000.

At an assumed assessment rate of 9.0% over 25 years, principal and interest repayments are about $98,700 a year. Counting 80% of the rent gives $78,400, which falls $20,300 short of the repayments on its own. Add the $51,000 of contributions and deduct $6,000 of fund running costs, and $123,400 is available to meet them.

The stress year assumes Marlow Engineering leaves after six months and the warehouse takes six months to re-let. The business also stops salary sacrifice, so contributions fall to $24,000, or $20,400 after tax. The fund pays the outgoings while the warehouse is empty, plus an assumed $10,000 in leasing fees and incentives to find a new tenant.

Cash flow	Normal year	Stress year
Rent received	$98,000	$49,000
Concessional contributions after 15% tax	$51,000	$20,400
Loan repayments	-$98,700	-$98,700
Outgoings during the vacancy	$0	-$8,000
Leasing fees and incentives	$0	-$10,000
Fund running costs	-$6,000	-$6,000
Net cash flow before tax	$44,300	-$53,300

The $120,000 of cash covers the $53,300 stress-year shortfall and leaves $66,700. A second year like it would force the fund to sell shares. Send the lender the evidence behind each line of the table.

• The signed lease and the valuer’s market rent assessment.
• Marlow Engineering’s financials, tax returns and current activity statements.
• The fund’s latest audited financial statements and tax return.
• Contribution statements for the last two years.
• Bank and share statements showing the $390,000 left after settlement.
• A valuation reporting the vacant possession value as well as the value subject to the lease.

Assemble the Commercial Application

A commercial SMSF application works when the holding structure, the deposit, the fund’s liquidity and the valuation all support the loan amount you request. A change to one of them changes the others. A lower valuation, for example, raises the deposit and shrinks the cash buffer behind the stress test.

Suppose the lender’s valuer values the Marlow warehouse at $1,330,000 and the lender lends 70% of that figure. The loan falls to $931,000, and annual repayments fall to about $93,800 at the same assumed rate. The fund now pays $559,000 at settlement and keeps $71,000 in cash, and the stress-year shortfall of $48,400 would leave only $22,600 of it.

Each lender also sets its own limits for an SMSF commercial mortgage. Pepper Money’s page, correct as of 20 August 2026, lends only to corporate trustees and needs minimum fund net assets of $150,000. It caps business real property purchases at 80% LVR and $5,000,000.

As at October 2026, La Trobe Financial’s page caps the LVR at 75%, with a $5,000,000 maximum loan at 75% LVR and $10,000,000 at 70% LVR.

When you compare lenders on SMSF terms such as trustee type and rent treatment, Bulma’s Policy Advisor answers from each covered lender’s policy documents. Each answer quotes the lender’s policy wording, which you can keep in the file notes beside the specialist’s confirmation.

Mixed-Use Property

A mixed-use property changes the questions you send the lender. Suppose the Marlow warehouse had a first-floor flat let to a residential tenant. Ask the lender whether it accepts mixed-use security for an SMSF loan, how its valuer treats the flat and whether the flat changes the maximum LVR.

The flat also raises a super law question for the specialist. SMSFR 2009/1 treats a residential tenant’s use as business use only where the landlord carries on a property investment business, which the ATO considers rare for an SMSF. Unless the flat’s use is minor or has permanently stopped, the specialist is unlikely to confirm business real property, and a new LRBA can’t finance the property without it.

The ruling’s shop example shows the boundary. A salon with an uninhabitable residence on the same title passed, because the residential use had permanently ceased and the business used the premises to an appreciable degree.

Pepper Money’s page lists single-title office, industrial and retail property and registered boarding houses as the property it finances. The mixed-use property loans guide covers lending outside super.

Lender Conditions and Fund Restrictions

Keep the lender’s conditions separate from the fund’s legal borrowing restrictions in the file. Lender approval confirms that the lender accepts the credit and the security. It doesn’t confirm that the fund can lawfully borrow, or that the lease meets super law.

Pepper Money shows why the two lists differ. Its page accepts written non-arm’s length lease agreements for business real property applications. The ATO still requires the fund’s investments, including the lease, to be on an arm’s length basis at market value.

Use this checklist to record both sets of requirements for the submission.

Requirement	Set by	Evidence on file
Maximum LVR and loan size	Lender	Contract of sale and the lender’s valuation
Trustee type and minimum fund net assets	Lender	Trustee company search and audited fund financial statements
Accepted property type	Lender	Title search, zoning and the valuer’s description of the property
Rent and contribution evidence	Lender	Lease, market rent assessment and contribution statements
Liquidity or servicing test	Lender	Bank and share statements, plus the stress test
Business real property when the LRBA starts and for its whole term	Super law	The specialist’s written confirmation of the property’s use
One acquirable asset on a single title	Super law	Title search showing one title
Holding trust and limited recourse	Super law	Holding trust deed and the loan contract
Lease at arm’s length and market rent	Super law	Signed lease and independent rent evidence
No borrowed money spent on improvements	Super law	Funding source for any fit-out or extension
Power to borrow	The fund’s trust deed	The specialist’s confirmation of the borrowing clause
Investment strategy covering the property and liquidity	Super law	The fund’s current investment strategy

The ATO’s rules for entering an LRBA let borrowed money pay purchase costs and repairs, but not improvements. Marlow’s planned crane rail and office fit-out must therefore come from the fund’s own cash or from the tenant. That spending reduces the cash buffer the stress test relies on.

The ATO’s investment strategy guidance requires the strategy to consider liquidity and the risk of too little diversification. That requirement applies even when a lender runs no liquidity test.

The 10 August 2026 change doesn’t affect an LRBA entered before that date, or a purchase contract exchanged before it. Refinancing an earlier LRBA keeps it outside the change too. For residential property the fund already holds under an LRBA, the SMSF loan guide covers the trustee documents and refinancing rules.

Rural Property in an SMSF

An SMSF rural property loan depends on how the land is used, not on its size or location. A farm run as a primary production business can be business real property. A lifestyle block used mainly as a home isn’t, however many hectares it covers.

Classify the rural land before you decide whether a commercial SMSF lender will accept it. Record these facts for each property.

Factor	What to record	Why it matters
Actual use	The farming business on the land, who runs it and its income records	The whole property needs to be used in a business
Dwelling	The area around the house used for private purposes and who lives there	The private area must be 2 hectares or less and not the property’s main use
Tenancy	Who leases the land, whether they’re related and how the rent was set	A related lease needs business real property and market rent
Improvements	Sheds, yards, water infrastructure and any planned works	Borrowed money can’t fund improvements
Related-party involvement	Whether members farm the land, live on it or are selling it to the fund	A purchase from a member needs business real property at market value
Water rights	Any water access licence included in the sale	A water licence isn’t real property and can’t be business real property

SMSFR 2009/1 shows how these facts decide the answer. A 10-hectare vineyard with a house on half a hectare is business real property, so the members could sell it to their fund and lease it back. A 40-hectare cattle farm failed, because its owner used about 3 hectares for the home, a garden and an ornamental lake.

Short-term business use doesn’t change the result. In another ruling example, six months of drought agistment on otherwise unused pastoral land didn’t make it business real property. The owner had never leased the land before and didn’t plan to lease it again.

Lenders sort rural land by product rules that are separate from the super law test. As at October 2026, La Trobe Financial’s commercial SMSF page lists commercial security. Its commercial rural loan is a separate product for non-metro properties over 100 acres used for business purposes.

Pepper Money’s page, correct as of 20 August 2026, doesn’t list rural property among the property types it finances. Acreage and a rural postcode decide which lender product fits, but they don’t make a property an eligible fund investment. The rural property loan guide explains how lenders classify rural security outside super.

Before you send a rural SMSF scenario to a lender, have the fund’s specialist confirm that the whole property is used in a primary production business under current ATO guidance. Then ask the lender whether it accepts that rural security for an SMSF loan, and on what LVR. If the specialist can’t confirm business use across the property, a new LRBA can’t finance it, whatever a lender is willing to lend.