A small business SMSF can buy property but rules must be followed

An SMSF is generally prohibited from acquiring property from its members, however there are some exceptions, a legal specialist said.

Michael Hallinan, special counsel for SUPERCentral, said the most relevant of these exceptions is when the property being acquired is classed as business real property, or a property that is used mainly for business purposes.

“Provided the asset is business real property and is acquired at market value, the SMSF can acquire either as a purchase or in-specie contribution the business premises from the member,” Hallinan said.

“To avoid compliance issues, standard conveyancing processes and procedures should be followed. It is also recommended that the trustee speak to the SMSF’s adviser to ascertain the stamp duty and capital gains tax implications of the transfer of the business premises prior to proceeding.”

He said in NSW, Victoria and WA the transfer of property may qualify for concessional transfer duty if the requirements for the concession are met.

Hallinan continued business use of real property by a related party of the SMSF is permissible provided that the rent charged on the property is at market rate in accordance with the arm’s length requirements under s109 of the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act). 

“Other compliance issues to be considered include the sole purpose test and whether the arrangement amounts to providing financial assistance to family members,” he said.

“If the terms of the lease are more for the benefit of the family members than for the SMSF then this may be in breach of the sole purpose test contained in s62 of the SIS Act, as the trustee is not managing the SMSF for the sole purpose of the benefit of the members.”

Additionally, he said, if the terms of the lease are favourable to the family members to the extent that it amounts to using the SMSF’s resources to give them financial assistance, this may also be in breach of the prohibition contained in s65 of the SIS Act.

“When the SMSF decides to sell the property, the usual transaction methods for a sale should be followed such as contract, deposit, outgoings adjustments, settlement. While this would generally be expected if the purchaser is an independent third party, it is important to also proceed in this manner if the property is to be sold to a related party of the SMSF,” Hallinan said.

“In addition, the trustee should also make sure that the property is sold at market value to avoid any compliance or detrimental tax implications. 

“If the property is held by a holding (bare) trustee under a limited recourse borrowing arrangement, the property can be sold directly to a third party without being first transferred to the SMSF trustee. However, it is important that the relevant compliance documentation is prepared to note the vesting of the holding trust arrangement.”

Keeli Cambourne

February 26 2026

smsfadviser.com