SMSF Commercial Property Loan Rates

Many Australians use their self-managed super fund (SMSF) to buy property – and commercial real estate is a popular choice.

What is an SMSF commercial property loan?

An SMSF commercial property loan is a specialised lending product allowing Australians to invest in offices, shops, warehouses, and other commercial property through their super fund.

For small business owners, this could mean leasing your business' premises from your own SMSF – paying rent to your super fund while it potentially realises capital gains.

Unlike a standard business loan, an SMSF commercial property loan is a 'limited recourse borrowing arrangement' (LRBA). Under an LRBA, if the fund defaults, its lender can only claim the property securing the loan, not SMSF's other assets.

How do SMSF commercial property loans work?

• Deposit
  Most lenders ask for at least 20% or 30% upfront (70% to 80% loan-to-value ratio (LVR))
  
  
• Loan size
  Commercial SMSF loans can run into the millions, with some lenders offering limits of $5 million.
  
  
• Interest rates
  Rates are generally higher than normal commercial loans, reflecting added risk for lenders.
  
  
• Fees
  Expect costs like application, establishment, risk, review, and ongoing fees.
  
  
• Restrictions
  SMSFs usually can't borrow for renovations, development sites, or vacant land.

How to compare SMSF commercial property loans

As SMSF commercial property loans are unique in two ways – being LRBAs and designed to aid the purchase of a relatively niche asset class – choosing which product will best suit your needs may seem daunting. Ultimately, the right loan will be the one that supports your fund's investment strategy while maximising returns for members

Here are some factors a trustee would be wise to consider:

Interest rate

Like any loan product, the simplest place to start is often the interest rate. This determines the day-to-day cost of borrowing through a particular lender or product.

LVR restrictions

SMSF commercial property loans typically demand larger deposits than traditional mortgages. It's common for a lender to ask an SMSF to put 20% to 30% down, leaving them with a maximum LVR of 70% to 80%.

Maximum loan size

Some lenders cap SMSF commercial property loans at $2 million, others at $5 million. If your SMSF is targeting a high-value property, it could pay to check for such limits early.

Fees

LRBAs generally demand larger fees than traditional mortgages, and these are often tied to the size of the loan being taken out. Costs can include application fees, establishment fees, and risk fees.

Features

Like SMSFs and properties, SMSF commercial property loans can vary widely. Some might offer fixed rates, others the option to make extra or interest only repayments.

Why choose a commercial property for your SMSF?

SMSFs are a big part of Australia's superannuation system.

As at June 2025, there were more than 650,000 SMSFs and 1.2 million SMSF members scattered across the nation, according to the Australian Taxation Office (ATO).

Of the more than $1 trillion invested in SMSFs, approximately $105 billion (around 10%) is invested in non-residential property – a figure that's grown by more than 40% in the past five years.

That makes commercial property the fourth most popular investment vehicle among SMSFs by value of investments, behind listed shares, cash and term deposits, and unlisted trusts.

It can be assumed, then, that many SMSF trustees already see commercial property as a worthwhile investment strategy inside their super.

SMSF regulations for commercial property investments

The property must meet ATO requirements, including being wholly used for business, serving the sole purpose of funding members' retirement, and being rented on an arm's length basis (market rates only, even if leasing to your own business).

SMSFs investing in commercial property: Pros and cons

Advantages commercial property investments and loans can offer SMSFs

• Higher rental yields
  Commercial leases often run longer and pay more than residential leases.
  
  
• Tax effectiveness
  Investing via an SMSF means rental income is taxed at 15% in accumulation phase, and may be tax-free once the fund reaches pension phase.
  
  
• Business synergy
  Small business owners can lease the property back at market rates, keeping rental payments in-house.
  
  
• Leverage
  Borrowing through a LRBA can allow your SMSF to purchase larger properties, potentially accelerating returns.
  
  
• High loan limits
  Loan limits for commercial properties can be up to $5 million, whereas SMSF residential loans are usually restricted to lower values.

Disadvantages commercial property investments and loans can offer SMSFs

• High entry costs
  A 30% deposit on a $5 million property likely requires $1.5 million of cash. With the average SMSF balance at around $1.6 million, such a leveraged purchase could wipe out much of a fund's liquidity.
  
  
• Higher costs
  Interest rates on LRBA (particularly those specialised for commercial property purchases) are steeper than standard loans, plus they generally demand additional fees.
  
  
• Liquidity risk
  Unlike shares or ETFs, commercial property is slow to sell if an SMSF needs cash.
  
  
• Market volatility
  Vacancies and downturns can impact returns.
  
  
• Compliance burden
  ATO rules around sole purpose and arm's length leasing are strict and mistakes can lead to heavy penalties.
  
  
• Concentration risk
  Tying up much of an SMSF in one property limits diversification.