SMSF Loans for Commercial Property in South East Melbourne, The Lender's View
If your SMSF already holds or wants to buy commercial property, the lending landscape looks quite different from what it did twelve months ago. The residential borrowing ban that took effect in August 2026 removed one pathway entirely, but business real property lending inside super is completely unaffected and remains a strong option for the right fund.
Whether you're a business owner looking to purchase your own premises through your SMSF, a trustee building a commercial property portfolio, or someone refinancing an existing commercial LRBA, the structure and the lender assessment work quite differently from a standard investment loan. The St Kilda Road office precinct and the Fishermans Bend renewal area in Port Melbourne are exactly the kind of commercial environments where this question comes up regularly, yet the lending mechanics are rarely explained clearly.
Our team works with SMSF trustees across South East Melbourne on SMSF lending structures, comparing across 60+ lenders who deal with this specialised market.
Key takeaways
- SMSF residential borrowing is banned from August 2026; commercial property LRBAs are unaffected.
- Typical commercial LVRs inside super run 60% to 75% depending on the property and lender.
- A minimum fund balance around $200,000 to $300,000 is typically expected before lenders engage.
What changed for SMSF property lending in 2026, and what did not?
From 10 August 2026, an SMSF can no longer enter a new Limited Recourse Borrowing Arrangement to acquire residential property. That is law, not a proposal, and it applies to new agreements only. Existing residential LRBAs are fully grandfathered with no forced sale and no compliance action required. Refinancing an existing residential LRBA to a new lender is still permitted.
Business real property sits in an entirely different category. Commercial property LRBAs are unaffected by the legislation and remain available through specialist and second-tier lenders. For business owners buying their own premises through their SMSF, the pathway is open. For trustees building a diversified commercial portfolio, the same applies.
We see a lot of trustees come in convinced the whole SMSF borrowing space has closed. The residential ban is real and significant, but commercial property LRBAs are still very much available — and for business owners buying their own premises, it's one of the most tax-effective structures we work with.
Evelyn Clark · Director, Mortgage & Finance Broker · Chat to Evelyn →
How do lenders assess an SMSF commercial property loan?
SMSF commercial loans are assessed on two distinct layers: the property's own income and the fund's overall financial position. Lenders want to see that the property can service the debt from its rental income, and that the fund has enough liquidity to handle gaps in tenancy or unexpected costs without touching the loan.
Property income and tenancy quality
Rental income from a commercial property is typically assessed at 70% to 80% of gross rent. Lease quality matters significantly: a long lease with a creditworthy tenant carries more weight than a short or informal arrangement. The remaining lease term, often called the weighted average lease expiry, influences how much a lender is willing to advance.
Fund financial position
Lenders generally expect a minimum fund balance of around $200,000 to $300,000 before they'll engage. After settlement, most require a liquidity buffer of roughly 10% of the loan amount or 5% to 10% of the asset value, so the fund isn't immediately strained. Contributions, rental income and any existing fund assets all feed into this picture.
Source: SMSF lending figures reflect typical specialist lender credit policy across the market.
What does an SMSF commercial property LRBA actually look like?
A Limited Recourse Borrowing Arrangement is the legal structure that allows an SMSF to borrow. The SMSF takes beneficial ownership of the property through a bare trust, and the lender's recourse on default is limited to that asset alone. It can't come after the rest of the fund's assets. That protection is what makes it suitable for super, and it's also what makes the structure more complex and the lender panel narrower than standard commercial lending.
The major banks largely exited SMSF lending in 2018 and 2019. The market today sits with specialist and second-tier lenders who build their credit policies specifically around the SIS Act requirements. Typical maximum LVRs for commercial property inside super run from 60% to 70%, meaning a deposit of 30% to 40% is usually required. Some lenders reach 75% for strong owner-occupier situations where the business itself is the tenant.
Rates are priced above standard commercial investment loans, typically by roughly 1% to 2%, reflecting the additional structural complexity. The sole purpose test means the property cannot be lived in or rented to a fund member or related party at any point.
Source: APRA; ATO — SMSF.
What does your SMSF need to qualify for a commercial property loan?
The lender will typically want to verify:
- › Fund balance: around $200,000 to $300,000 minimum, with a clear post-settlement liquidity position.
- › Trust deed: the SMSF deed must expressly permit borrowing. Older deeds sometimes don't.
- › Bare trust structure: a correctly established bare trust (holding trust) is required before settlement, not after.
- › Lease documentation: a current signed lease, or a letter of intent from an arm's length tenant if the property is pre-leased.
- › Audited fund financials: typically two years of SMSF tax returns and financial statements.
- › Sole purpose compliance: the property must satisfy the ATO's sole purpose test. Lenders confirm this as part of their assessment.
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When does borrowing through an SMSF to buy commercial property not make sense?
The structure adds meaningful legal and administrative cost. Setting up the bare trust, updating the deed, engaging an SMSF auditor familiar with LRBAs, and meeting ongoing compliance obligations all cost more than equivalent personal investment structures. For a fund with a modest balance buying a lower-value property, those costs can erode the tax advantage substantially.
If the commercial property is in a sector that's difficult to value or re-let — specialist-use properties, single-tenant assets in thin markets — lenders will often either decline or cap the LVR more aggressively. The fund is then carrying a less liquid asset at a high concentration, with fewer lenders willing to refinance it if the relationship needs to change.
The right test is whether the tax environment inside the fund genuinely outweighs the structural cost and the reduced lender competition. For a business owner paying commercial rent to a third party when their SMSF could hold the same building and receive that rent, the case is often compelling. For a trustee adding a commercial property for diversification alone, it's worth running the numbers carefully with an accountant first.
Where we'd lean toward the SMSF structure is where the business is already paying rent — and the owner's fund could be receiving that income instead. The numbers usually work well there. Where it's purely an investment play with no existing tenancy, I'd want to make sure an accountant has stress-tested it first.
Evelyn Clark · Director, Mortgage & Finance Broker · Chat to Evelyn →
How do you set up an SMSF commercial property loan in South East Melbourne, step by step?
Step 1: Talk to us
We start by working out whether your fund's balance, deed and intended property type actually stack up for a commercial LRBA, and which lenders on our panel are worth approaching for your situation.
Step 2: Get your fund and advisers aligned
Your accountant and SMSF administrator need to confirm the deed permits borrowing, establish the bare trust structure, and provide the fund financials a lender will want to see before formal assessment can begin.
Step 3: Match to a lender and apply
We identify the specialist lenders whose credit policy fits your property type, tenancy and fund position, then prepare and submit the application with the LRBA documentation the lender requires.
Step 4: Manage approval through to settlement
Commercial SMSF approvals involve more back-and-forth than standard loans. We manage the lender's conditions, coordinate with your legal team on the bare trust, and keep the timeline on track to settlement.
What goes wrong when trustees try to borrow for commercial property inside super?
The most common points of failure:
- › Outdated trust deed: many older SMSF deeds don't expressly permit borrowing, and a lender will not proceed without confirmation that it does. This is discovered late and delays settlement.
- › Bare trust established too late: the bare trust must be set up before the contract is signed, not after. Setting it up post-exchange creates a compliance issue the lender will not overlook.
- › Related-party tenancy traps: a fund member or a related party cannot be the tenant on a residential property inside super. For commercial property, it is permitted if it's on arm's-length commercial terms — but the documentation must be airtight.
- › Narrow lender panel: going to the wrong lender first can result in a declined application sitting on the credit file. The major banks don't do this. Knowing which specialist lenders are actively writing SMSF commercial loans right now is the difference.
- › Insufficient post-settlement liquidity: funds that look adequate at application can fall short once settlement costs, stamp duty and the buffer requirement are factored in. Lenders check this carefully, and it's a common reason for a revised approval.
Frequently Asked Questions
Can an SMSF still borrow to buy commercial property after the 2026 residential ban?
Yes. The August 2026 law bans new LRBAs for residential property only. Business real property LRBAs are fully unaffected and remain available through specialist lenders.
What LVR can an SMSF get on a commercial property loan?
Typical commercial LVRs inside an SMSF run from 60% to 70%, with some specialist lenders reaching 75% for strong owner-occupier cases where the business is the tenant.
Can an SMSF buy business premises and rent them to the member's own company?
Yes, for commercial property this is permitted under the SIS Act, provided the lease is on genuine arm's-length commercial terms and the property satisfies the sole purpose test.
How much does an SMSF need in its fund before a lender will consider a commercial loan?
Most specialist lenders expect a minimum fund balance of around $200,000 to $300,000, plus a post-settlement liquidity buffer representing roughly 10% of the loan amount.
Can an SMSF refinance an existing commercial property loan to a new lender?
Yes. Refinancing an existing commercial LRBA to a different lender is permitted and can make sense when the fund's equity position or the market has shifted since the original loan was written.
Should SMSF trustees use a mortgage broker or go directly to a specialist lender?
A mortgage broker, every time. The SMSF commercial lender panel is narrow and shifts regularly, and a declined application from the wrong lender sits on the credit file. Knowing which lenders are actively writing this business right now is the core value.
Your Next Steps
SMSF commercial property lending rewards preparation. The fund's deed, its balance, the bare trust structure and the property's tenancy all need to be in order before the right lender will engage, and the right lender is not the obvious one. Getting this right early saves the kind of delays that can cost a contract.
The right lender for your SMSF commercial property loan depends on your fund's position and the property type, and that's a conversation worth having. Talk to the EverLend team or call 03 7036 3356, and we'll compare your options across 60+ lenders.
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External Resources
EverLend · South East Melbourne · Ever Lend Pty Ltd (ACN 625 080 515), authorised under Australian Credit Licence 517192 · General information only - this article does not constitute financial advice. Please consider your own circumstances and seek professional advice before making any financial decisions.
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