Why Practice Owners Are Buying Their Premises Through Super

If you're a doctor, dentist, lawyer or other professional running your own practice, one of the more underused strategies available to you is buying the premises you work from through your self-managed super fund. With residential property now off the table for SMSF borrowing, you need to understand what's changed and, more importantly, what hasn't. Business real property, broadly, commercial premises used in a business, can still be purchased through an SMSF using a limited recourse borrowing arrangement.

Recent changes to superannuation law removed the ability for SMSFs to borrow to purchase residential property, but business real property was specifically carved out and remains unaffected. Business real property generally means land and buildings used wholly and exclusively in a business, which under the ATO's rules can include a medical or dental clinic, legal chambers, or other professional practice premises. Where a fund member operates their business from the property, the fund can even lease the premises back to that member's business at a commercial market rent, provided the arrangement is conducted on arm's length terms.

This structure allows practice owners to use their superannuation savings to acquire the property their business operates from, with the practice paying rent to the SMSF rather than to an external landlord. Over time, this can build long-term wealth inside a tax-advantaged superannuation environment, while giving the practice long-term security of tenure rather than being subject to a third-party landlord's decisions. It's a strategy that has been available for years, but the recent residential lending changes have brought new attention to what SMSFs can still do.

As with any SMSF borrowing arrangement, strict rules apply around related-party dealings, market-rate rent, and the fund's overall investment strategy and diversification. This is not a strategy to pursue without proper advice from your accountant and financial adviser, working alongside a broker experienced in SMSF lending.

What Counts as Business Real Property

The ATO's definition of business real property is specific. The land and buildings must be used wholly and exclusively in one or more businesses, whether that business is run by a fund member, a related party, or an unrelated third party. For a professional practice, this typically covers the consulting rooms, chambers, or clinic space where the business physically operates, but it generally does not extend to a mixed-use property where part is used for the business and part is used for another, unrelated purpose, without careful structuring.

Getting this classification right is critical, because if a property doesn't meet the business real property test, purchasing it through an SMSF LRBA may not be permitted, or could create a compliance breach if the fund's circumstances change over time. This is a question to confirm with your accountant or SMSF specialist before you proceed, rather than assuming a property qualifies based on general use.

How the Purchase and Lease-Back Typically Works

In a common structure, the SMSF trustee purchases the practice premises, potentially using a limited recourse borrowing arrangement if the fund doesn't hold sufficient cash to buy the property outright. The practice, operated by the fund member through their business entity, then leases the property from the SMSF at a commercial market rent, generally supported by an independent valuation to demonstrate the arrangement is on arm's length terms.

The rental income received by the fund forms part of its investment returns, taxed concessionally within the superannuation environment. Over time, as the loan is paid down using rental income and other fund contributions, the fund's equity in the property grows, building retirement savings through an asset the practice owner already needed to occupy regardless of the ownership structure.

What to Weigh Up Before Using This Structure

This strategy suits some practice owners better than others. It generally works best where the fund has sufficient existing balance or the capacity to service a loan through fund contributions and rental income, where the practice has a stable, ongoing need for the specific premises, and where the fund member is comfortable with a portion of their retirement savings being concentrated in a single property asset rather than spread across a more diversified portfolio.

It's also important to plan for succession and exit. If you eventually sell the practice or retire, the fund's ownership of the premises needs a clear plan, whether that's an incoming practice owner continuing to lease the property, a sale of the property alongside the business, or another arrangement altogether. These questions are best worked through at the outset with your accountant and adviser, not left until a transition is already underway.

For medical and legal professionals building a long-term practice, owning your premises through your SMSF is a strategy worth exploring, not because it suits every situation, but because it can turn rent you're already paying into equity that builds your retirement savings. The team at Key Change Finance works alongside accountants and financial advisers to structure SMSF lending correctly for professionals in exactly this position.

Get in touch with us to find out whether this strategy makes sense for your practice.

Frequently Asked Questions

Can my SMSF still buy my medical or legal practice premises?

Yes. Business real property, which includes premises used wholly and exclusively for a business such as a medical clinic or legal chambers, remains permitted for SMSF purchase, including through a limited recourse borrowing arrangement. This is unaffected by the recent changes that removed SMSF borrowing for residential property.

Can my SMSF lease the property back to my own practice?

Yes, provided the arrangement is conducted on arm's length terms. This generally means charging a commercial market rent, supported by an independent valuation, and documenting the lease formally. Related-party arrangements like this are permitted but attract close scrutiny, so it's important to structure and document them correctly from the outset.

What qualifies as business real property under superannuation law?

The ATO defines business real property as land and buildings used wholly and exclusively in one or more businesses. For a professional practice, this typically covers consulting rooms, clinic space or chambers where the business physically operates. Mixed-use properties need careful assessment, as not all uses will meet the test.

Do I need a full cash balance in my SMSF to buy business premises, or can the fund borrow?

The fund can use a limited recourse borrowing arrangement to purchase business real property if it doesn't hold sufficient cash to buy outright. The fund needs to be able to service the loan through a combination of rental income, contributions and other fund earnings, which is a key factor to assess before proceeding.

What happens to the property if I sell my practice or retire?

This needs a clear plan established well before the transition happens. Options can include an incoming practice owner continuing to lease the property from the fund, selling the property alongside the business, or the fund retaining and re-leasing the property to a new tenant. Working through this with your adviser at the outset avoids complications later.