Pete and Joan, both experienced medical practitioners, recently undertook a strategic investment through their self-managed superannuation fund (SMSF) to purchase a commercial property for their expanding practice. With a combined SMSF balance of $500,000, and now maximising their concessional contributions at $30,000 each per annum, they’ve created a structure that not only secures their business premises but also accelerates ownership and builds long-term retirement wealth — all within a tax-effective environment.
This strategy, while powerful, is not one-size-fits-all. It requires careful structuring, compliance with superannuation law, and a deep understanding of tax and lending rules.
Pete and Joan engaged a specialist SMSF adviser, with total advice costs ranging between $5,500 and $7,700, covering structuring, compliance, lending coordination, and long-term strategy modelling. In their words, it was “money well spent” — the difference between a good idea and a great outcome.
Step 1: Structuring the SMSF for Property Acquisition
Pete and Joan established their SMSF with a corporate trustee, a structure preferred for its flexibility, succession planning benefits, and asset protection. They also created a bare trust to comply with Limited Recourse Borrowing Arrangement (LRBA) rules, which allows their SMSF to borrow to acquire the property while protecting other fund assets.
Setup Costs Summary:
SMSF & Corporate Trustee: $3,067
Bare Trust & Corporate Trustee: $3,200
Legal & Conveyancing: $5,000–$7,000
Deposit (30% of $1M): $300,000
Stamps $57,568 (VIC)
Liquidity Buffer (10%): $100,000
Insurance & Management: $15,000 annually
Total Initial Outlay: ~$411,267–$413,267
Step 2: Financing and Income Strategy
Pete and Joan’s SMSF borrowed $700,000 to purchase a $1 million commercial property, leased to their own practice at market rates — currently 6.85% yield for medical commercial property in Melbourne.
Annual Cash Flow:
Rental Income: $68,500
Concessional Contributions: $60,000
Total Available for Loan Repayment: $128,500
Step 3: Accelerated Ownership Timeline
Using rental income and concessional contributions, Pete and Joan’s SMSF can repay the loan in just 7 years — without any additional out-of-pocket funding.
Year | Interest Paid | Principal Paid | Remaining Loan |
1 | $38,500 | $90,000 | $610,000 |
2 | $33,550 | $94,950 | $515,050 |
3 | $28,328 | $100,172 | $414,878 |
4 | $22,818 | $105,682 | $309,196 |
5 | $17,006 | $111,494 | $197,702 |
6 | $10,874 | $117,626 | $80,075 |
7 | $4,404 | $80,075 | $0 |
Outcome: Full ownership of the property within 7 years, while simultaneously growing their superannuation balance.
Step 4: Strategic Retirement Benefits
Tax-Free Sale in Retirement
If Pete and Joan sell the property after age 60 and are fully retired, the SMSF can be in pension phase, meaning:
No capital gains tax on the sale
No tax on rental income
No tax on earnings within the fund
This could result in hundreds of thousands in tax savings, especially if the property appreciates significantly.
Ongoing Rental Income
Post-retirement, they can lease the property to other practitioners, generating tax-free rental income to support their lifestyle, or alternatively sell the asset tax-free and invest the proceeds to provide a lifestyle.
Step 5: Business and Wealth Strategy Advantages
1. Rent Paid to Themselves
Instead of paying a landlord, their practice pays rent to their SMSF — effectively recycling business income into retirement savings.
2. Secure Tenancy
Owning the premises via SMSF ensures long-term control, avoiding lease renegotiations or relocation risks.
3. Asset Protection
The property is held in a bare trust under LRBA, shielding personal assets from business liabilities.
4. Super Growth
Their $60,000 annual contributions are not only growing their super but also paying down the loan, compounding their retirement wealth.
5. Tax Efficiency
All income and capital gains within the SMSF are taxed at 15% or 0% in pension phase, making this one of the most tax-effective structures available.
The Role of Advice
This strategy is complex and highly regulated. Pete and Joan’s success hinged on getting the right advice — not just from an accountant or mortgage broker, but from a specialist SMSF adviser who understood:
Superannuation law
Lending structures
Bare trust compliance
Retirement modelling
Tax optimisation
Advice costs typically range from $5,500 to $7,700, depending on the scope and complexity. For Pete and Joan, this was a strategic investment in their future — ensuring compliance, maximising benefits, and avoiding costly mistakes.
Conclusion
Pete and Joan’s SMSF strategy is a masterclass in combining business growth with retirement planning. By leveraging concessional contributions and rental income, they’ve created a structure that:
Acquires a key business asset
Repays the loan in under a decade
Builds superannuation wealth
Enables a tax-free exit strategy
Provides secure, long-term income in retirement
Talk to us about your fund
WE SMSF looks after the administration, documentation and compliance side of self-managed super. If this article raised a question about your fund, call 1300 459 101 or email shaun@wesmsf.com.au.
