Commercial property is often treated differently from residential property in SMSF structures — and this distinction is central to understanding the proposed SMSF borrowing changes.
Commercial SMSF property may include business premises, offices, warehouses, industrial units, medical suites, consulting rooms, retail shops, and showrooms. Many small business owners use SMSFs to own business real property, which is then leased to their operating business on commercial terms.
Under the Superannuation Industry (Supervision) Act 1993 (SIS Act), business real property is one of the few asset types that an SMSF can acquire from, or lease to, a related party. This makes commercial property a strategically important asset class for SMSF investors who also run their own business.
Key issues for SMSF commercial property include business real property rules, related party leasing rules, market rent documentation, lease formality requirements, ATO valuation requirements, SMSF investment strategy compliance, borrowing arrangement compliance, insurance requirements, depreciation documentation, and CGT planning.
In our experience preparing depreciation schedules for SMSF commercial properties across Australia, the most common gap is the fit-out. Business owners who use their SMSF premises tend to invest significantly in commercial offices, medical suites, and retail fit-outs — and these items carry strong Division 40 depreciation entitlements that are frequently missed without a formal depreciation schedule.
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