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We all want to bask in our retirement, sipping pina coladas on an island beach, spending time with family, or enjoying a leisurely game of golf. With this goal firmly in mind, an increasing number of Australian’s see investment in commercial real estate through a Self-Managed Super Find (SMSF) as a step in the right direction.

With commercial property offering secure income yields with a relatively low capital risk, it is little wonder that savvy Australian’s are taking advantage of low-interest rates to supercharge their retirement fund.

However, before you get started on the paperwork, you have to understand the pros and cons of managing your super. If you go down this path, you are in charge. You decide what to invest in, and you need to meet all the legal requirements, so be prepared to do a lot of research, reading, and hard work. Remember, this is your retirement fund that you are putting on the line. That said, if you are savvy and have a thorough understanding of the economy, investing in commercial real estate via an SMSF can deliver perks like a mere 15% tax rate on rental income.


Investment Options

To qualify for purchase under an SMSF, an investment must meet the following criteria:

  • Be used for the sole purpose of providing retirement benefits to members of the fund
  • Not be purchased from someone related to a member
  • Not be lived in by any members of the fund or those related to them
  • Not be rented by any members of the fund or those related to them

As long as you meet these requirements, you can invest in any combination of the following:

  • Commercial real estate
  • Residential real estate
  • Australian and international funds
  • Australian and international shares
  • Futures
  • Bonds
  • Term Deposits
  • The foreign exchange market
  • Antiques and collectables
  • Businesses


The Benefits of SMSF Investment in Commercial Property

Not only is it tax effective to purchase commercial property, but you can salary sacrifice to pay the loan with pre-tax income. You also have the freedom to add value to your investment and your business premise at the same time through renovation and repairs. When you choose to sell, capital gains tax is discounted to 10%, and if you hold onto the property until you retire, the sale proceeds or rent may be tax-free. You do need to ensure that the rent continues to remain at market value, so don’t head down this path thinking that you will be getting mates rates.

Many Australian’s with SMSFs choose to purchase a commercial premise that they then rent back to their own business. If you are looking seriously at purchasing your place of business, we shared more information on the advantages and disadvantages of owner-occupied commercial property in a previous post.


Getting Started

Before you begin, you need to do your research. Many people who set up their SMSFs consult with an accountant, financial advisor and a lawyer along the way to ensure that they are making the right decision and completing the paperwork correctly to meet ATO requirements. Once you understand your obligations, you must:

  • Set up a trust – to establish a trust, you must determine the trustees, assets and identifiable beneficiaries
  • Prepare and sign the trust deed – this is generally prepared by a legal practitioner to ensure that you maintain maximum control moving forward
  • Complete a trust declaration – the declaration must use the ATO approved format and be lodged within 21 days of becoming a trustee
  • Register with the Australian Business Register – you must register your SMSF within 60 days of its establishment
  • Set up a superannuation bank account – the fund’s earnings, rollovers and contributions will be processed via this account

Plus, each self-managed super fund must have an SMSF investment plan which sets out your investment strategy going forward. The document needs to outline the diversification strategy, level of acceptable risk and return, how the fund will ensure ongoing liquidity, and insurance.


If you want to take advantage of the perks of commercial real estate for your SMSF, talk to our team at MCO. We can guide you through the specifics and help you to grow your nest egg!