What types of Commercial Property can an SMSF Buy?

An SMSF can acquire various types of commercial property as long as it meets the investment strategy. One common method is to use borrowings under a limited recourse borrowing arrangement (LRBA) which is effectively a mortgage on the commercial property. It is important to note up front that recent legislation in 2026 bans SMSFs from borrowing for residential property and requires any leveraged property purchase to meet the business real property (BRP) definition.

What are common types of commercial property an SMSF can acquire?

Commercial property an SMSF can consider includes:

• medical centre
• dental office
• professional offices
• warehouses
• retail shops
• farming land
• hairdressing salon

Hint– special rules apply to farming land when it also includes a private residence

How can an SMSF buy commercial property?

If an SMSF has sufficient cash resources, it can acquire commercial property directly and is not required to meet the BRP test unless it is being purchased from a related party of the fund or leased to a related party.

Other methods include:

1. Borrowings where an SMSF can acquire commercial property that also meets the BRP criteria and finance the purchase via an LRBA
2. Pooling cash with other investors being members of the fund, or other related parties, via a fixed unit trust. An ungeared, or related unit trust is a structure allowing the fund and other related parties to invest in commercial property (must also meet BRP definition). The property cannot be charged, and the unit trust cannot have any borrowings. Essentially all it does is hold the property and lease it to a related party on an arm’s length basis.
3. Tenants in Common arrangement where an SMSF can own a commercial property with another person or entity; typically, this is on a 50/50 basis but can have different ownership levels. Each party owns a separate, defined share of the property. The share of the property can be dealt with separately by each tenant. The property cannot be borrowed against in this scenario.
4. Unrelated fixed unit trust where an SMSF or related parties, grouped together, do not hold more than 50% of the units or can otherwise control the trust. This means the trust could have three unrelated investors, where the SMSF does not control the unit trust, and it could borrow, putting a charge over the property.

SMSF investing in Real Estate Investment Trusts (REITs)

An SMSF can gain exposure to commercial office buildings in Sydney, Melbourne CBD, and other major Australian metropolitan centres, as well as retail shopping centres, healthcare facilities, data centres, large industrial buildings, distribution centres, and warehouses, with relatively small amounts of capital.

REITs can be structured in different ways: listed on the Australian stock exchange (A-REITs) or offered as unlisted property funds. A REIT invests in income-producing real estate assets and offers an attractive way for an SMSF to diversify its investment portfolio without the capital outlay required to invest in large commercial properties.

As REITs can be traded on the ASX, they are usually highly liquid assets. An unlisted REIT is accessed through a fund manager or a financial adviser, and liquidity may be more variable.

SMSF investing in Exchange Traded Funds (ETFs)

ETFs can be another option for an SMSF to invest in A-REITs such as:

• Vanguard Australian Property Securities Index ETF (VAP), which tracks the S&P/ASX 300 A-REIT index
• SPDR S&P/ASX 200 Listed Property ETF (SLF), which tracks the S&P/ASX 200 A-REIT Index
• VanEck Australian Property ETF (MVA)

The above ETFs track the indices of various listed property trusts either by covering a broad range or concentrating on select characteristics.

SMSF investing in commercial property using a managed fund

Property funds are managed by professional fund managers and structured as trusts, pooling investor funds to invest in a single property or a wide range of property-related assets. Managed property funds can offer income returns, capital growth, or a mix. Managed funds are often unlisted and may be less liquid than listed property trusts, as they often have fixed investment terms with limited withdrawal periods. The units are based on the valuation of the fund’s net assets, which is not available in real time. Property trusts are often valued by the fund manager on a monthly or quarterly basis. The minimum investment can range from $10,000 to more than $250,000.