Case Study: How Two Doctors Used Their SMSF to Secure, Own, and Retire with a Commercial Property — Tax-Free

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

Thinking about doing the same?

Book a FREE 45-minute SMSF strategy consult to explore how this could work for your practice or business.

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