Comparison
SMSF vs Personal Commercial Property Investment
An SMSF can buy commercial property — and lease it back to your own business — at concessional tax rates that personal or trust ownership cannot match. The catch is a stricter lending regime, lower LVRs, and Limited Recourse Borrowing Arrangement complexity. Here is the structure-by-structure trade-off.
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Why this comparison is non-trivial
Inside an SMSF, commercial property income is taxed at 15% during accumulation and 0% in pension phase, and capital gains attract a 10% effective rate after the one-third discount. Outside super, the same income is taxed at the borrower's marginal rate (up to 47% personal, 30% company, distributed marginal in trust). For a sophisticated borrower 10–20 years from retirement, the tax differential compounds materially. But the SMSF lane is also slower, more expensive to establish, and lower-leverage — and getting the structure wrong can crystallise serious ATO consequences.
What 'Business Real Property' actually means
SMSFs can only acquire commercial property that meets the Business Real Property test (SISA s66) — wholly and exclusively used in one or more businesses. Vacant land held speculatively does not qualify. Mixed-use with a residential component above ~5% does not qualify. The fund can lease the property to a related party (typically the member's own trading business) at arm's-length market rent without breaching the in-house asset rule — this is the single biggest structural advantage of the lane.
SMSF (LRBA) vs Personal / Trust
Side-by-side on the metrics commercial credit committees actually weigh.
| Attribute | Tax-effective long holdSMSF (LRBA) | Maximum LVR + flexibilityPersonal / Trust |
|---|---|---|
| Tax on net rental income | 15% (accumulation) / 0% (pension) | Up to 47% (personal) / 30% (company) |
| CGT on sale | 10% effective (1/3 discount) / 0% in pension phase | Up to 23.5% with 50% discount (personal) |
| Max LVR (commercial) | 65–70% | 65–75% |
| Lender pool | ~12 active SMSF commercial lenders | ~35 active commercial lenders |
| Headline rate | From ~7.5% p.a. | From ~6.5% p.a. |
| Loan structure | Limited Recourse Borrowing Arrangement + bare trust | Standard mortgage |
| Recourse | Limited to the secured asset | Full recourse + personal guarantees |
| Borrowing capacity driver | Rent + member contributions | Borrower / trust serviceability |
| Setup cost | $3,000–$6,000 (bare trust + LRBA) | Standard purchase costs only |
| Can lease back to own business | Yes (Business Real Property, arm's-length rent) | Yes (less constrained) |
| Time to settle | 5–9 weeks | 3–8 weeks |
When SMSF is the right structure
You operate a trading business that pays rent every month to an unrelated landlord, and that rent could equally land in your own super fund. The fund has at least $200k in liquid assets (rule of thumb for sustainable LRBA serviceability and post-acquisition liquidity). The asset is genuinely Business Real Property — commercial, industrial, retail, medical, childcare or similar. The hold horizon is 10+ years to capture the tax differential through accumulation and into pension phase. Member contributions and rent can comfortably service the LRBA without breaching the contribution caps.
When personal or trust ownership wins
Hold horizon under 7 years — setup and exit costs eat the tax advantage. Higher leverage is required (LVR > 70%) — SMSF lenders will not match this. The asset is not Business Real Property (vacant land, speculative dev site, mixed-use with material residential). The fund balance is below $200k — lender appetite collapses. The borrower wants to redraw or top up — LRBA prohibits new borrowings against the same asset, which can be a real constraint as values rise.
Lender appetite right now
Approximately 12 lenders write SMSF commercial LRBAs in Australia — almost all non-bank since the majors exited SMSF lending in 2018–2019. Pricing has compressed materially since 2023 as competition has returned. Standard policy is 65–70% LVR with at least 10% post-settlement liquidity in the fund, 1.30x ICR on rent + concessional contributions, and member balances above $200k. Outside SMSF, the lender pool is roughly three times larger and pricing is ~75–125 bps tighter for an equivalent borrower.
SMSF (LRBA) vs Personal / Trust — FAQ
The questions sophisticated commercial borrowers ask when choosing between these two structures.