The flagship strategy: your own business premises

Somebody’s retirement fund is getting rich off your business’s rent. This chapter is about making sure it is yours.

Every month for eleven years, Raj’s consultancy paid rent. Good months and bad months, the rent went out. Raj once worked out that the business had paid its landlords over $400,000 since it started. “I built someone else’s retirement,” he told me, “one direct debit at a time.”

Then his accountant asked a question that changed the shape of his next twenty years: “Why doesn’t your super fund become the landlord?”

This chapter is that question, taken seriously.

Why this strategy survived everything

Walk back through the rules from chapter 4 and notice how business real property, BRP, keeps appearing on the short list of exceptions:

• Your fund cannot buy property from a related party. Except BRP, at market value.
• Your fund cannot lease property to a related party beyond the trivial 5 per cent in-house limit. Except BRP, without limit.
• Since 10 August 2026, your fund cannot borrow to buy real property. Except BRP.

That is not coincidence. Parliament has always intended small business owners to be able to hold their premises inside super, and when the 2026 reforms tore up the residential borrowing pathway, they deliberately left this one standing. Farmers keep the farm. The physio keeps the rooms. The engineer keeps the office. It is the most protected position on the board, and if you own a business that pays rent, it deserves your full attention.

The mechanics in one paragraph

Your SMSF buys the premises your business needs, from a third party or from you personally at market value. Your business signs a proper commercial lease with the fund at market rent. From then on, the business pays rent like any tenant, claims it as a deduction like any tenant, and the fund banks it like any landlord, taxed at 15 per cent on the way through and at 10 per cent or zero on the eventual capital gain. The money that used to leave your world every month now does a lap and comes back as your own retirement savings.

The maths of the loop

Take Raj’s numbers. His business pays $45,500 a year in rent either way; the question is only where it lands.

Renting from a stranger: the business claims the deduction, worth about $11,375 at the 25 per cent company rate, and $45,500 of post tax wealth accrues to someone else, forever.

Renting from the fund: the business claims the identical deduction. The fund receives $45,500, pays 15 per cent tax, and keeps roughly $38,700 a year building Raj and Anjali’s retirement. Over fifteen years, before rent reviews and before any growth in the property itself, that is more than $580,000 redirected from a stranger’s pocket to their own.

And the deal is better than the cash flow alone. The business gets a landlord who will never terminate the lease to redevelop, never refuse a reasonable fitout, never sell the building out from under it. Security of tenure is worth real money to an operating business, and here it comes free.

There is a catch, and honesty demands it get equal billing: Raj’s fund now has one large asset whose tenant is Raj’s business. His salary, his business equity and his super’s rental income all depend on the same enterprise. If the consultancy fails, the fund does not just lose a tenant; it loses its tenant while its trustee loses his income. The strategy concentrates risk exactly where your life is already concentrated. It is still usually worth it. It is never worth pretending the concentration is not there.

Raj’s purchase, by the numbers

In 2023, rather than buying the cramped unit they rented, the Patels’ fund bought a larger vacant unit from a retiring owner occupier two streets away.

• Purchase price: $700,000, plus GST, which chapter 9 turns into its own story
• Deposit: $245,000, being 35 per cent, from the fund
• Loan: $455,000 through a limited recourse borrowing arrangement over 20 years at 7.4 per cent, repayments around $43,700 a year
• Market rent: independently assessed at $45,500 net, with the business paying outgoings on top under a five year lease with two five year options and fixed 3 per cent annual increases

Rent covers the repayments with a whisker to spare, contributions of around $30,000 a year keep building the buffer, and every rent review from here widens the gap. By the time the loan is done, Raj is around retirement age, the fund owns the premises outright, and the business is paying its rent into a pension phase fund taxed at zero. That is the whole play, executed patiently.

Note the date stamp: the borrowing was straightforward in 2023 and remains straightforward today, because the property is business real property. This exact transaction is as available to you now as it was to Raj then.

The rules that make or break it

Everything above works only if the arrangement would look identical with a stranger in your chair. The law does not mind that you are dealing with yourself. It minds enormously if you behave like it. Four disciplines, none optional.

Buy at market value, provably. If the fund buys premises from you or your entities, get an independent valuation before the contract, not a mate’s appraisal after it. Pay for the real thing. This document protects the entire structure.

Set rent at market, provably, and keep it there. Get written market rent evidence: a valuer’s rental determination or at least two independent agent appraisals. Refresh the evidence every two to three years and at every market review. And notice the trap runs both directions: below market rent is a benefit to your business and a breach; above market rent is a disguised contribution and a NALI event. Market means market.

Sign a real lease and live by it. A proper commercial lease, executed before the business moves in, with term, reviews, outgoings, make-good and permitted use all specified. Then perform it: rent paid in full, on time, by the business to the fund, with arrears chased the way a real landlord would chase them. The fastest way to poison this strategy is a few years of casual, roundish payments whenever cash flow suits.

The fund pays for the building; the business pays for its business. Capital works, the new roof, the extension, the air conditioning plant, are the owner’s cost and must be paid by the fund. If the business quietly funds an improvement to the fund’s asset, the non-arm’s length rules from chapter 4 can taint every dollar of that property’s future income and its entire capital gain at 45 per cent, permanently. Of all the corners people cut, this is the one with no repair kit. When in doubt, the fund pays, and the paper trail says so.

One extraordinary footnote: during the pandemic, regulators sanctioned specific rent relief between related parties on documented commercial terms. That was a marked exception in a marked emergency. In normal times, your struggling business gets no mates rates from your fund. The two hats never share a head: when you sign as trustee, you are the landlord, full stop.

What the auditor will ask for

Every year, expect to produce: the lease, the rent ledger showing payments matching it, the current market rent evidence, the outgoings reconciliation, proof the fund paid any capital costs, and the property valuation. Keep them in one folder and the audit is twenty minutes. Keep them nowhere and you are reconstructing history under deadline, which is how honest people end up with contraventions.

Buying from yourself: the extra moves

If the fund is buying premises you already own personally, two more pieces join the board.

Duty. Transfer duty generally applies at market value, though several states offer meaningful concessions for transferring your own business premises into your own fund. The rules are state specific and condition heavy, so ask the question before assuming either answer.

Your own capital gains tax. Selling to your fund is a CGT event for you personally. Here the small business CGT concessions can do remarkable things: shrinking the gain, eliminating it entirely after fifteen years, or converting it into a super contribution under the retirement exemption. This is specialist advice territory with six figure swings attached. Get the advice before you sign anything, because the concessions have conditions that cannot be retrofitted.

When the flagship is the wrong boat

Skip this strategy, or defer it, if the business is young or wobbly, because doubling your exposure to a fragile enterprise is not a retirement plan. Skip it if the premises the business needs are worth far more than the fund can sensibly carry, because a fund that is 95 per cent one building has no room to breathe. And think hard if the business is likely to outgrow or relocate soon, because your fund’s investment case should not depend on a tenant that leaves in three years, even when the tenant is you.

Owning your premises through super is a strategy for stable businesses with predictable space needs and funds big enough to hold one large asset without holding only that asset. If that is you, it is close to unbeatable. If it is not you yet, the rest of this book still works: Grace from chapter 7 built the same retirement machine with strangers as tenants.

Find your sweet spot, or have the guts to walk away.