The Smartest Way to Buy Commercial Property with SMSF

Understanding SMSF Commercial Property Loans

As a pharmacy assistant, you might not realise that your self managed super fund could be the key to purchasing commercial property and accelerating your retirement savings. SMSF commercial loans allow you to use super to buy an investment property, creating a tax effective investment that builds wealth while you work.

A Limited Recourse Borrowing Arrangement (LRBA) is the legal structure that enables super fund borrowing. This arrangement protects your other super fund assets, as lenders can only access the specific property purchased if loan repayments aren't met. Many pharmacy assistants working towards retirement security find this structure provides control retirement planning while managing risk effectively.

Why Consider SMSF Commercial Property?

Purchasing an SMSF commercial property offers several advantages over an SMSF residential property:

• Higher rental yields: Commercial properties typically generate stronger rental payments than residential alternatives
• Longer lease terms: Tenants often sign multi-year agreements, providing stable income for SMSF repayments
• Tenant-paid outgoings: Many commercial leases require tenants to cover maintenance and operating costs
• Tax benefits: Income within your super fund is taxed at 15%, substantially lower than personal income tax rates

SMSF Deposit Requirements and Loan Structures

When applying for an SMSF commercial loan, you'll typically need:

• A deposit of 25% to 30% of the property value (higher than the deposit 20% often required for SMSF residential loans)
• Adequate funds in your super fund to cover SMSF settlement costs and establishment fees
• A corporate trustee structure (preferred by most SMSF specialist lenders)
• Compliance with SMSF property rules and regulations

The loan to value ratio (LVR) for SMSF commercial property is generally capped at 70-75%, meaning your SMSF LVR determines the maximum loan amount available.

Principal and Interest vs Interest Only SMSF Loans

You'll need to choose between two repayment structures:

Principal and interest SMSF loans reduce your loan amount over time, building equity faster and typically offering lower interest rates. This approach suits funds with consistent contribution capacity.

Interest only SMSF loans keep repayments lower initially, maximising cash flow within your super fund. This option works well when rental income covers interest costs while allowing contributions to grow elsewhere.

The SMSF Investment Strategy Component

Your SMSF investment strategy must document how commercial property fits your retirement goals. This strategy should address:

1. How the property aligns with your fund's objectives
2. Risk diversification across your super fund assets
3. Liquidity to meet member benefits and SMSF loan fees
4. Insurance considerations for the property

Maintaining SMSF compliance requires regular reviews of this strategy. SMSF Bank statements and documentation must demonstrate adherence to SMSF rules throughout the loan term.

Accessing SMSF Loan Options

At Pharmacist Home Loans, we access SMSF Loan options from banks and lenders across Australia, connecting you with SMSF approved lenders who understand the pharmacy sector. Not all financial institutions offer SMSF property loans, making specialist knowledge valuable.

SMSF loan rates vary between lenders, and factors affecting your interest rate include:

• Property type and location
• Your fund's financial position
• The proposed loan structure
• The strength of your SMSF investment strategy

Some lenders offer an SMSF offset account, allowing you to reduce interest charges while maintaining liquidity for other opportunities.

The SMSF Loan Application Process

Applying for a self managed super fund loan involves several stages:

1. Fund assessment: Ensuring your super fund has adequate balance and appropriate structure
2. Property identification: Finding a suitable SMSF commercial property that meets lender criteria
3. Documentation preparation: Gathering SMSF Bank statements, trust deeds, and financial records
4. Lender submission: Presenting your SMSF loan application to appropriate SMSF approved lenders
5. Property valuation: Independent assessment to confirm the property value
6. Settlement: Finalising the purchase through your super fund's holding trust

This process typically takes longer than standard investment property purchases, requiring careful coordination between your SMSF trustee, mortgage broker, and legal advisors.

SMSF Refinance Opportunities

If you already own property through your super fund, an SMSF refinance can:

• Reduce your interest rate and lower repayments
• Switch from interest only to principal and interest structures
• Access equity for additional property purchases (subject to SMSF borrowing rules)
• Consolidate multiple superannuation loans

As with any refinancing strategy, comparing SMSF Mortgage options across multiple SMSF specialist lenders ensures you secure competitive terms.

Tax Benefits and Wealth Building

The tax benefits of using super to buy an investment property are substantial:

• Rental income taxed at 15% during accumulation phase
• Capital gains tax discounted to 10% when assets held longer than 12 months
• Tax-free income during pension phase
• Deductible interest payments and property expenses

These tax advantages make SMSF commercial loans a powerful wealth building tool for pharmacy assistants planning long-term retirement security.

SMSF Settlement Costs and Ongoing Fees

Budget for these costs when planning your purchase:

• Stamp duty (varies by state)
• Legal fees for establishing the holding trust
• SMSF loan fees including establishment and ongoing charges
• Valuation and building inspection costs
• Ongoing SMSF administration and compliance expenses

Your superannuation loan may also incur discharge fees if you decide to sell the property or pay out the loan early.

Building Your Retirement Property Strategy

For pharmacy assistants looking to control retirement outcomes, an SMSF commercial property can form the cornerstone of a comprehensive retirement property strategy. Combined with regular superannuation contributions and prudent property selection, this approach positions you for financial independence.

Whether you're considering your first SMSF property loan or expanding your property portfolio, understanding SMSF deposit requirements, borrowing capacity, and compliance obligations is essential for success.

The team at Pharmacist Home Loans specialises in helping pharmacy professionals access suitable SMSF Loans tailored to their circumstances. Our knowledge of both the pharmacy industry and self managed super fund borrowing enables us to guide you through each stage of the process.

Call one of our team or book an appointment at a time that works for you to discuss how an SMSF commercial loan could strengthen your retirement savings and create lasting wealth through property investment.