What Are SMSF Industrial Property Loans in Queensland

What Is an SMSF Commercial Loan for Industrial Property

An SMSF commercial loan is a limited recourse borrowing arrangement that allows your self-managed super fund to borrow and acquire business real property, including industrial premises. The fund obtains a beneficial interest in the property through a holding trust, legal title transfers after the loan is repaid, and the lender's recourse is limited to the asset itself.

From 10 August 2026, any new LRBA over real property must be used to purchase business real property. Industrial premises leased to an operating business meet that definition, provided the property is used wholly and exclusively in one or more businesses for the entire life of the loan. A commercial zoning or description does not by itself satisfy the requirement. The property must be actively used in a business when you enter the LRBA and continuously throughout the borrowing.

Consider a Queensland SMSF trustee purchasing a 600-square-metre warehouse in an industrial estate near the Brisbane airport. The property is leased to a logistics company on a five-year term. The SMSF engages a commercial SMSF loan broker to structure the LRBA, borrows 70 per cent of the purchase price through a non-bank lender, and the holding trust takes legal title. The SMSF pays down the loan using rental income and additional contributions. The property qualifies as business real property because it is used wholly and exclusively in the tenant's logistics operations.

SMSF Commercial Loan LVR and Deposit Requirements

Most lenders cap SMSF commercial loan LVR at 70 per cent, meaning the fund must contribute a 30 per cent deposit plus settlement costs. Some lenders allow 80 per cent LVR for high-quality assets or where the borrower has a strong financial position, but the majority settle at the lower ratio. The deposit must come from existing fund cash, contributions, or the sale of other fund assets. Borrowed funds cannot be used to fund the deposit.

The 30 per cent contribution is typically sourced from member concessional or non-concessional contributions made in advance of settlement. Concessional contributions are capped and taxed at 15 per cent on entry. Non-concessional contributions are after-tax and subject to annual and total balance caps. The fund's cash position and contribution room determine how quickly the deposit can be assembled.

Industrial properties in Queensland precincts such as Yatala, Brendale, and Rochedale often settle in the range where a 30 per cent deposit is required. Lenders assess the asset's income-producing capacity, lease term, tenant covenant, and location. A property with a national tenant on a long lease in an established industrial corridor will support a higher LVR than a single-bay workshop with a short-term lease to an unrated tenant. Settlement costs include stamp duty, legal fees, and loan establishment fees. Stamp duty in Queensland is calculated on the dutiable value and varies by transaction size.

Related Party Leases and Lease-Back Arrangements

An SMSF can lease industrial property to a related party, including a business controlled by a fund member, provided the lease is on arm's length terms and the property is business real property. The lease-back structure allows a member's business to occupy premises owned by their super fund while the fund receives rental income taxed concessionally or exempt if supporting a pension.

Business real property leased to a related party is not treated as an in-house asset, so the 5 per cent in-house asset limit does not apply. The lease must be documented, the rent must reflect market rates, and the tenant must meet all obligations as if dealing at arm's length. Non-arm's length income rules apply if the rental is below market or the arrangement does not reflect commercial terms. NALI is taxed at 45 per cent, which removes the concessional tax benefit.

In a scenario where a Queensland SMSF acquires a workshop in Cairns and leases it to the member's construction business, the lease agreement must specify market rent, duration, and maintenance responsibilities. The SMSF trustee obtains an independent valuation to confirm the rent is at market, the business pays on time, and the SMSF records the rental income. The property remains business real property throughout the LRBA because it is used wholly and exclusively in the construction business. If the business vacates and the SMSF converts the property to another use or leaves it idle without seeking a replacement tenant, the property may stop meeting the business real property definition and trigger a breach of the LRBA rules.

SMSF Commercial Rental Income and Tax Treatment

Rental income from an industrial property held in an SMSF is taxed at 15 per cent during accumulation phase or may be exempt if the property supports a retirement phase income stream. The tax outcome depends on whether the fund is in full accumulation, full pension, or a mixed phase with both accumulation and pension interests.

In accumulation, the SMSF pays 15 per cent tax on net rental income after deductible expenses such as loan interest, property management, rates, insurance, and repairs. Loan interest is deductible against rental income in the year it is incurred. Capital improvements are not deductible but are added to the property's cost base for capital gains tax purposes when the asset is sold.

When a fund enters pension phase and the industrial property supports a pension account, income from that asset may qualify for exempt current pension income. The fund can apply the segregated method if all assets support pensions at all times during the financial year, or the proportionate method if the fund has both pension and accumulation interests. Under the segregated method, rental income and capital gains on segregated pension assets are fully exempt. Under the proportionate method, an actuary determines the exempt proportion applied to total assessable income. A fund with a mix of pension and accumulation members will typically use the proportionate method and obtain an actuarial certificate each year.

Capital Gains Tax on SMSF Industrial Property Sales

A complying SMSF is entitled to a one-third CGT discount if the industrial property was held for at least 12 months, producing an effective rate of 10 per cent on the discounted gain during accumulation phase. The net capital gain is calculated as total capital gains less capital losses and unapplied losses from earlier years, less the 33.33 per cent discount. The actual tax liability depends on the asset's cost base, sale price, and the fund's overall tax position.

If the property supports a pension when sold and the fund applies the segregated method, the capital gain is disregarded entirely and any capital loss cannot be offset against other gains. Under the proportionate method, the exempt proportion of the gain is exempt and the balance is taxed at 15 per cent after applying the discount. A property acquired in accumulation and sold after the fund transitions to pension phase may receive partial or full exemption depending on the fund's status at the time of sale and the method applied.

Capital losses on SMSF property sales cannot be deducted against rental income or other ordinary income. Losses are carried forward and offset only against future capital gains. A loss on an industrial property can be offset against a gain on another asset in the same year or carried forward indefinitely until a gain arises.

SMSF Commercial Loan Refinancing and Maintaining the LRBA

An LRBA entered into before 10 August 2026 can be refinanced on or after that date without the property needing to meet the business real property definition. An LRBA entered into on or after 10 August 2026 must be maintained while the property continues to meet that definition. If the property stops being business real property during the LRBA, the fund breaches the borrowing prohibition and compliance action may apply.

Refinancing means entering into a new loan contract for the same asset with the same or a different lender. The ATO considers a significant change to the terms or conditions of an LRBA to end the arrangement and start a new one. A refinance must meet the law that applied when the refinancing took place. Where a new holding trust is created, the asset must transfer directly to the new trust without the SMSF temporarily obtaining legal title.

An industrial property in accumulation with an existing LRBA may be refinanced to reduce the interest rate or extend the loan term, provided the property remains business real property if the LRBA was entered into on or after 10 August 2026. If the property is leased and the tenant vacates, the fund must secure a replacement tenant and maintain the property's use in business. If the fund abandons plans to lease the property or repurposes it, the property no longer qualifies and the LRBA is invalid. A fund looking for a new tenant does not automatically lose business real property status, but the intention to lease must be genuine and ongoing.

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