Unlock the Secrets to Buying a Warehouse with SMSF

Self-managed super funds can still borrow to purchase commercial property, including warehouses, through a Limited Recourse Borrowing Arrangement.

The August changes to SMSF borrowing rules ended new residential property loans inside super but left the pathway to commercial assets untouched. If you operate a business in Wooloowin or the surrounding precincts and want to own rather than lease your warehouse, your SMSF may be the most tax-effective vehicle to make it happen. The difference between paying rent to a landlord and paying rent to your own super fund compounds over decades, and a warehouse acquired under an LRBA can deliver both tax-advantaged income during accumulation and a tax-exempt asset during pension phase.

What Makes a Warehouse Qualify as Business Real Property

A warehouse qualifies as business real property when it is used wholly and exclusively in a business. The business using the warehouse does not need to be your business. A tenant can occupy the property, provided the actual use of the building satisfies the wholly and exclusively test at the time of acquisition and throughout the life of the LRBA. A warehouse leased to an unrelated logistics company, manufacturing tenant, or storage operator will satisfy this definition as long as the use remains commercial.

Consider a fund member who operates a joinery business from leased premises in Newmarket and locates a 400-square-metre warehouse in the Breakfast Creek industrial corridor. The property is tenanted by an unrelated warehousing business on a three-year lease at current rates. The fund acquires the property under an LRBA, with the joinery business owner intending to occupy the premises when the lease expires. At acquisition, the property is used wholly and exclusively for warehousing by the existing tenant, satisfying the business real property test. Once the lease ends, the member's own business occupies the premises and pays market rent to the SMSF. Both scenarios satisfy the definition, provided the lease between the SMSF and the member's business is documented, executed at arm's length, and supported by an independent valuation.

How the Limited Recourse Borrowing Arrangement Works

The borrowed funds are used to acquire a single asset, which is held in a bare trust separate from the SMSF. The SMSF holds a beneficial interest in the asset and acquires legal ownership after the loan is fully repaid. If the loan defaults, the lender's recourse is limited to the asset held in the trust. No other SMSF assets are exposed.

The asset must be a single acquirable asset. A warehouse on one title qualifies. Two adjoining warehouses on separate titles do not, even if bought from the same vendor at the same time. The borrowed funds can cover the purchase price, loan establishment costs, and stamp duty, but cannot be used to fund renovations or capital improvements after settlement. A fund that borrows $850,000 to acquire a warehouse cannot subsequently draw down a further $100,000 from the same LRBA to install a new roller door or extend the loading dock.

Rental Income, Tax Treatment, and Related Party Leasing

Rental income from a warehouse held in an SMSF during accumulation phase is taxed at 15 percent. A warehouse generating $60,000 in annual rent produces $51,000 after tax if the fund has no deductible expenses or capital losses to offset. Where the tenant is the member's own business, a related party lease is permitted, but must be made on arm's length terms supported by an independent valuation and documented lease agreement. Charging below-market rent, deferring rent payments, or allowing the business to occupy the property without a formal lease will breach the arm's length requirements and may trigger non-arm's length income provisions, taxing the entire rental stream at 45 percent.

Where a fund has commenced a pension and the warehouse is a segregated current pension asset for the entire income year, rental income is tax-exempt under the exempt current pension income provisions. A warehouse producing $60,000 in rent delivers that full amount to the pension account without a 15 percent deduction. This outcome requires the asset to support a retirement-phase income stream, minimum pension payments to be satisfied, and the fund to meet all compliance conditions throughout the year.

Loan Structure, Deposit Requirements, and Borrowing Capacity

Lenders offering SMSF commercial property loans typically require a deposit of 30 to 40 percent, meaning maximum loan-to-value ratios sit between 60 and 70 percent depending on the asset quality, location, and tenancy profile. A warehouse purchase requiring $1.2 million may require the fund to contribute $360,000 to $480,000 as a deposit, with the balance funded through an LRBA.

Borrowing capacity depends on the rental income generated by the property, the fund's existing balance, the member's capacity to make ongoing contributions, and the lender's serviceability criteria. A fund with $400,000 in accumulated super acquiring a warehouse tenanted at $55,000 per annum may support a loan of $700,000 to $800,000 depending on the lender's assessment of rental coverage and contribution headroom. Unlike residential lending, SMSF commercial loans are assessed primarily on the asset's income-generating capacity rather than the member's personal income, though lenders will consider the member's ability to top up contributions if rental income falls short of loan repayments.

Variable rates on SMSF commercial loans currently sit higher than residential variable rates. Safe harbour interest rates published by the ATO under PCG 2016/5 apply to LRBAs between the SMSF and a related party lender. Where the lender is a bank or commercial non-bank lender, the loan terms must still satisfy arm's length principles, meaning the rate, fees, and security arrangements must reflect what an unrelated party would accept in a commercial transaction.

Capital Gains Tax on Disposal During Accumulation and Pension Phase

Where a warehouse is sold during accumulation phase after being held for at least 12 months, a one-third CGT discount applies to the capital gain. The effective maximum rate on the discounted gain is 10 percent, though the actual liability depends on the property's cost base, capital improvements, selling costs, and whether the fund has carried-forward capital losses. A warehouse acquired for $1 million and sold for $1.4 million after five years produces a nominal gain of $400,000. With the one-third discount, the taxable gain is approximately $267,000. At 15 percent, the tax liability is around $40,000, assuming no offsetting losses or deductions.

Where the warehouse is a segregated current pension asset at the time of sale and the fund's assets have been fully segregated for the entire income year, the capital gain is disregarded entirely. A $400,000 gain on disposal during pension phase produces no tax liability. This outcome requires the asset to support a retirement-phase income stream throughout the income year and minimum pension payments to have been met. Partial segregation or a mixed accumulation and pension balance will reduce the exemption to a proportion determined by an actuarial certificate.

Division 296 Tax and Total Superannuation Balance Thresholds

From 1 July 2026, members with a total superannuation balance exceeding $3 million at the end of the financial year are subject to an additional 15 percent Division 296 tax on the proportion of earnings attributable to the amount above that threshold. Where the balance exceeds $10 million, a further 10 percent applies to the portion above that second threshold. Both thresholds are indexed annually.

Division 296 fund earnings for SMSF purposes are based on an adjusted amount of the fund's taxable income. Rental income from a warehouse contributes to this calculation. An unrealised increase in the warehouse's market value does not trigger Division 296 tax unless a CGT event occurs. LRBA loan amounts are disregarded when calculating the member's total superannuation balance for Division 296 purposes, meaning the outstanding debt on the warehouse acquisition does not reduce the member's exposure to the threshold test.

SMSFs were permitted to elect to adjust the cost base of CGT assets to market value as at 30 June 2026 for Division 296 earnings purposes. This election recognised accrued gains prior to commencement of the Division 296 regime and applied to all CGT assets held directly by the fund at that date. The election was irrevocable and had to be made by the due date of the 2026-27 annual return.

Refinancing an Existing SMSF Loan After the August Changes

Existing SMSF loans entered into before 10 August 2026 can be refinanced without triggering the new residential property restrictions. The ATO considers refinancing to mean entering into a new loan contract for the same asset, with the same or a different lender. A fund with a residential property LRBA established in early 2026 can refinance to a different lender in late 2026 or beyond and remain compliant, provided the refinanced arrangement relates to the same asset and maintains the limited recourse character of the original loan.

Commercial property LRBAs are unaffected by the August changes and can be refinanced at any time, subject to the usual compliance conditions. A warehouse LRBA entered into in 2024 and refinanced in 2027 to access a lower interest rate remains fully compliant, provided the refinanced loan relates to the same single acquirable asset and maintains limited recourse to that asset only.

Structuring the Holding Trust and Acquiring Legal Ownership

The holding trust must give the SMSF trustee a beneficial interest in the warehouse and the right to acquire legal ownership once the loan is repaid. A bare trust satisfies these requirements. A discretionary trust does not. The SMSF cannot be one of multiple unit holders in a unit trust holding the asset.

Legal ownership transfers to the SMSF trustee after the final loan repayment is made. Until that transfer occurs, the asset remains held in the bare trust and the SMSF holds the beneficial interest. Rental income, capital gains, and all investment returns flow to the SMSF throughout the term of the LRBA, even though legal title has not yet transferred. Once the loan is discharged, the trustee of the bare trust transfers legal ownership to the SMSF trustee, and the holding trust is wound up.

Sole Purpose Test and Member Occupation of the Warehouse

Every SMSF investment must be maintained for the sole purpose of providing retirement benefits to members. A warehouse leased to the member's own business satisfies this test if the lease is on arm's length terms and documented. A warehouse used by the member's business without a lease, at below-market rent, or with deferred payments may breach the sole purpose test and trigger compliance action.

The member's business can occupy the warehouse, but the SMSF must charge market rent, enforce payment terms, and document the arrangement with a formal lease agreement supported by an independent valuation. A member operating a manufacturing business who uses the SMSF-owned warehouse as a workshop must pay the same rent an unrelated tenant would pay for equivalent premises in that location. Rent must be paid on time, and any arrears must be pursued in the same manner the fund would pursue an unrelated tenant.

Acquiring a commercial property from a related party is permitted under the business real property exception to the related party acquisition rules, provided the acquisition satisfies the definition of business real property and is made on arm's length terms. A member cannot sell their personally owned warehouse to their SMSF at an inflated price. The transaction must be supported by an independent valuation and the price must reflect what an unrelated buyer would pay in an arm's length transaction.

Call one of our team or book an appointment at a time that works for you. We work with SMSF specialists, property valuers, and commercial loan providers across Brisbane to structure Limited Recourse Borrowing Arrangements that meet ATO compliance standards and fit your fund's capacity. Whether you are acquiring your first warehouse in Wooloowin or refinancing an existing SMSF loan, we can compare SMSF lenders and walk you through deposit requirements, loan structure, and the trustee obligations that come with holding commercial property inside super.

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