Yes, an SMSF can buy a business real property like a Truganina factory, including one leased back to your own business, provided strict rules are met. The property must be used wholly for business purposes, acquired at market value, and any borrowing must comply with limited recourse borrowing arrangement rules. Speak with your SMSF specialist.
Truganina keeps coming up in these conversations because it sits right in the path of growth along the west, with factories, warehouses and small industrial units that suit exactly the kind of tenant who might also be the buyer. A business owner leasing their own premises from their own super fund is not unusual out here. It just has to be done properly.
The property has to earn its place in the fund on commercial terms, not as a favour to the business that occupies it.
Why business real property is the key phrase
The Australian tax rules allow an SMSF to acquire what is called business real property, land and buildings used wholly and exclusively in a business. A Truganina factory used for manufacturing, storage or logistics generally qualifies. This is what allows a related party transfer, meaning you can sell your own factory into your own fund, or have the fund buy a new one and lease it back to your business, as long as everything happens at arm's length.
Where the real limits sit
The rules are not about whether you can do it, they are about how you do it. Rent has to be set and reviewed at market rate, exactly as it would be for an unrelated tenant. Borrowing inside the fund has to run through a limited recourse borrowing arrangement, which restricts what the lender can claim if things go wrong and limits what improvements can be made to the asset while debt is attached to it. Contribution caps also govern how much can flow into the fund to help fund a purchase or pay down a loan.
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Sole purpose testthe fund must exist to provide retirement benefits, not to prop up your trading business, so the arrangement has to stand on its own commercial logic.
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Market rent obligationthe lease between your business and your fund must reflect genuine market terms for comparable Truganina industrial space, reviewed regularly.
3
Borrowing structureany loan used to buy the factory inside super typically needs to be structured as a limited recourse borrowing arrangement, which comes with its own restrictions on the asset.
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No major improvements under debtwhile a loan is attached, there are limits on how much the property can be developed or substantially altered, which matters if you are eyeing expansion.
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Contribution capsthe amount that can go into the fund each year to service the purchase or the loan is capped, and this shapes what is realistic to acquire.
A factory that fits comfortably inside these rules can become one of the most tax effective assets a business owner ever holds in super.
Mistakes we see business owners make
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Assuming any industrial property qualifiesland with a significant non business use attached, such as a large residential component, can fail the business real property test.
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Setting rent to suit cash flow rather than the marketa lease priced to help the business rather than reflect market rent can put the fund's compliance at risk.
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Forgetting stamp duty and transfer costsmoving an existing factory into an SMSF still triggers standard property transfer costs, it is not a free shuffle of assets.
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Planning a big expansion after purchasesubstantial improvements funded by further borrowing while a limited recourse arrangement is in place can be more restricted than owners expect.
What to weigh up before you start
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Your fund's balancethe fund needs enough capital or borrowing capacity to acquire a Truganina factory outright or service a compliant loan comfortably.
2
Your business's lease commitmentyou are effectively signing your business up to a long term market rent lease with your own super fund as landlord.
3
Growth plans for the siteif you expect to expand or redevelop within the next several years, structure this into the plan early rather than after settlement.
4
Exit and successionthink through what happens to the property inside the fund if you sell the business, retire, or bring in a partner.
Common questions
1
**Can my SMSF buy a factory I already own personally?** Yes, this is a common related party transfer, but it must occur at market value with proper valuation and legal documentation, and normal transfer costs still apply.
2
**Can my SMSF buy vacant industrial land in Truganina and build a factory later?** This is possible in some structures but development while a loan is attached to the asset is restricted, so the sequencing needs careful planning with your adviser.
3
**Does my fund need to buy the whole property outright?** No, an SMSF can hold a property jointly with related parties or through certain structures, though this adds complexity that should be reviewed with a specialist.
4
**Who do I talk to before going further?** Your accountant, financial adviser or SMSF specialist should confirm eligibility and structure, Fairmont can then help identify and negotiate the right Truganina property once the financial groundwork is set.
This is general information only, not financial, tax or legal advice. Fairmont Property Group is a property agency, not a licensed financial adviser, and any SMSF purchase should be structured with your own qualified professionals.
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Manny Singh
Director (OIEC), Fairmont Property Group
Fairmont only sells and leases industrial property across Melbourne's western corridor and Geelong. That focus is deliberate. It means we know the buyers who are active right now and what they are prepared to pay.
