Can my SMSF buy/use business premises if I am a small business owner?

Financial Newswire Contributor

23 February 2026

Townsends Lawyers Special Counsel, Michael Hallinan answers the questions around small business owners using their SMSFs to buy business premises.

• Can my SMSF buy/use business premises if I am a small business owner?
• What is a limited recourse borrowing?
• Can I rent out the property to family and friends?
• What happens when I want to sell the property?

Generally speaking, an SMSF is prohibited from acquiring property from its members however there are some exceptions.  The relevant one here is business real property, which broadly means property used mainly for business purposes. Provided the asset is business real property and is acquired at market value, the SMSF can acquire (either as a purchase or in-specie contribution) the business premises from the member.

To avoid compliance issues, standard conveyancing processes and procedures should be followed.

It is also recommended that the trustee speak to the SMSF’s adviser to ascertain the stamp duty and capital gains tax implications of the transfer of the business premises prior to proceeding.

If the property is located in New South Wales, Victoria or Western Australia, the transfer of property may qualify for concessional transfer duty if the requirements for the concession are met (these vary from State to State).

What is a limited recourse borrowing?

A limited recourse borrowing is an arrangement where an SMSF borrows money to purchase an asset, either from a commercial lender or a related party of the SMSF (the lender can even be the members themselves).

As these can be complex arrangements, it is crucial that trustees turn to their adviser to help them navigate any compliance pitfalls and avoid running afoul of the legislation.  Legislative requirements include the asset being held by a holding trustee (or custodian) for the SMSF trustee while the loan remains in place, the SMSF providing all of the purchase money and limitations on improvements to the property.

In addition to legislative requirements, the SMSF will need to obtain specialist advice on the stamp duty implications of their proposed acquisition prior to signing any transactional documents. If the arrangement is not properly set up and implemented from the start, the SMSF runs the risk of not only contravening the superannuation legislation but also incurring double (or even triple) the amount of stamp duty that would normally be payable.

Can I rent out the property to family and friends?

Business use of real property by a related party of the SMSF is permissible provided that the rent charged on the property is at market rate in accordance with the arm’s length requirements under s109 of the Superannuation Industry (Supervision) Act 1993 (Cth) (‘SIS Act’).

Other compliance issues to be considered include the sole purpose test and whether the arrangement amounts to providing financial assistance to family members.

If the terms of the lease are more for the benefit of the family members than for the SMSF then this may be in breach of the sole purpose test contained in s62 of the SIS Act, as the trustee is not managing the SMSF for the sole purpose of the benefit of the members.

Also, if the terms of the lease are favourable to the family members to the extent that it amounts to using the SMSF’s resources to give them financial assistance, then this may also be in breach of the prohibition contained in s65 of the SIS Act.

What happens when I want to sell the property? 

When the SMSF decides to sell the property, the usual transaction methods for a sale should be followed (e.g. contract, deposit, outgoings adjustments, settlement, etc). While this would generally be expected if the purchaser is an independent 3^rd party, it is important to also proceed in this manner if the property is to be sold to a related party of the SMSF.

In addition to the above, the trustee should also make sure that the property is sold at market value to avoid any compliance or detrimental tax implications.

If the property is held by a holding (bare) trustee under a limited recourse borrowing arrangement, the property can be sold directly to a third party without being first transferred to the SMSF trustee.  However, it is important that the relevant compliance documentation is prepared to note the vesting of the holding trust arrangement.

Michael Hallinan is Special Counsel – Superannuation with SUPERCentral is an independent online platform provider of SMSFs, advice, legal documentation and wealth management services to accounting and financial planning firms throughout Australia.