Purchasing Property Through an SMSF: Perspective for Professionals & Business Owners

The decision to purchase property through a Self‑Managed Super Fund (SMSF) requires careful thought. Not because it is inherently complex, but because the rules that govern what an SMSF may buy — and from whom — are strict, nuanced, and often misunderstood.

This is reflected in investor behaviour.

Despite Australians’ passion for property, the ATO continues to report that non‑residential property represents only a modest share of the total SMSF asset pool — a sign that many trustees lack clarity or confidence in navigating the rules. And yet, when done properly, property can be one of the most powerful and tax‑efficient long‑term wealth strategies available.

Among the most common questions we hear is:

“Can our SMSF acquire a residential property from us personally?”

A surface‑level answer is:

“No, you cannot acquire a residential property from a related party, nor can you lease one to a member or related party.”

But that answer, while technically correct, is incomplete.

A specialist adviser knows that the real question is not whether the property looks residential — but whether it meets the definition of Business Real Property (BRP) at the time of acquisition.

The Heart of the Rule: How the Property Is Used at Acquisition

Under s66 of the SIS Act, an SMSF may acquire an asset from a related party if the property is Business Real Property at the time the fund acquires it. This is confirmed by ATO ruling SMSFR 2009/1, which defines BRP as property “used wholly and exclusively in one or more businesses.”

In everyday practice, this leads to scenarios where a building may appear residential — zoned residential, originally built as a home, located in a residential street — but is used 100% as business premises, such as:

• A dentist operating full‑time from a converted house

• A physiotherapy clinic occupying what was once a family home

• A professional practice running commercially from a repurposed dwelling

If the property is wholly and exclusively used for the business at acquisition, the SMSF can legally acquire it from the member or related entity — even if the structure was once a home.

The “De Minimis” Principle — Minor Personal Use

Paragraph 215 of SMSFR 2009/1 provides a pragmatic allowance: if non‑business use is minor or trifling, BRP status may still apply. Think of intermittent storage of files or equipment — but not living areas, accommodation, or regular personal use.

Incidental Personal Use vs Mixed‑Use

The moment genuine personal use creeps in — e.g., storage of personal goods that is more than trivial, or an area lived in or used by family — the property ceases to meet BRP requirements.

The test is strict, but sensible.

Can You Convert a Residential Property Before the SMSF Buys It?

Yes — if it is done properly.

A trustee may arrange for the vendor (often themselves or their related entity) to:

• Fit‑out rooms as consulting suites

• Install appropriate commercial infrastructure

• Change usage documentation, occupancy, and compliance

• Establish a genuine business lease

Before the SMSF acquires the asset, the property must be demonstrably and substantively used for business purposes.

This means:

• The ATO will look for substance, not cosmetic changes

• Auditors expect long‑term intention, not temporary repurposing

• The lease must reflect arms‑length commercial terms

This aligns with your original guidance: “Please don’t try to bend rules; the ATO and auditor will be looking to see that changes are long‑term and serious.”

LRBA Warning: You Cannot Change the Nature of the Property Mid‑Loan

If the property is under a Limited Recourse Borrowing Arrangement (LRBA):

• You may complete repairs

• You may complete maintenance

• You cannot perform improvements that fundamentally alter the character or use of the property

• You cannot convert from residential → commercial under the LRBA

• You cannot subdivide or materially modify the asset

Only once the LRBA is fully repaid can the asset’s character be changed.

This is an area where many trustees unintentionally breach the rules.

Why Business Owners Are the Real Winners of SMSF Business Real Property

For business owners — from medical professionals to trades, consultants to retail operators — the BRP rules offer a unique structural advantage unavailable to wage earners.

1. Your Business Pays Rent to Your Future Self

Rent becomes:

• A tax‑deductible expense to the business

• Concessional‑tax income to the SMSF (15% in accumulation, 0% in pension)

It is one of the cleanest and most disciplined ways to shift wealth from the trading entity to the retirement structure — legally and tax‑efficiently.

2. You Control the Premises Your Business Relies On

Holding the asset inside your SMSF means:

• No landlord risk

• No forced relocations

• Stable, long‑term premises for your business

• The ability to invest in fit‑outs knowing the property benefits your retirement wealth

3. Strong Asset Protection

Superannuation enjoys significant legal protections. Holding the business premises in the

SMSF ring‑fences one of your key assets from:

• Trading risks

• Litigation

• Business downturns

4. Tax‑Advantaged Growth

While your business pays rent, the SMSF accumulates wealth in a low‑tax environment — particularly powerful for practices with premium locations or properties likely to appreciate.

5. Synergy With Small Business CGT Concessions

If selling a business or active business asset:

• You may contribute sale proceeds into super under the CGT lifetime cap ($1.865m in 2025/26)

• These contributions sit outside NCC caps

• This can fund the purchase of BRP inside super, often with no tax on the sale itself

For many business owners, it is the single most valuable tax concession they will ever use.

If you have clients who own their business premises, are considering buying commercial property, or are simply curious about whether their current property could qualify as Business Real Property — now is the ideal time to explore what’s possible.

The 2025/26 rules create an unusually favourable environment for business owners and professionals to:

• secure their business premises,

• move assets into a protected environment,

• convert business rent into retirement wealth, and

• take advantage of contribution opportunities that may never be this generous again.

For many people, this becomes the turning point where their business and personal wealth strategies finally align — legally, efficiently, and powerfully.

At WE SMSF, this is exactly the space we specialise in. Whether you are a business owner exploring the idea for yourself, or an adviser with clients who could benefit from the clarity and structure an SMSF property strategy provides, we’re here to guide you through the nuances and ensure every step is compliant, commercial, and genuinely in your best interests.

If this article has sparked a question, an opportunity, or even just a “what if,” we invite you to reach out.

Call us on 1300 459 101or connect directly with: Shaun McCheane — shaun@wesmsmf.com.au Andre Dirckze — andre@wesmsmf.com.au

The conversation costs nothing — but the strategy could change everything.