Ask a room of Adelaide specialists and GP owners what their self-managed super fund holds and a surprising number will say “the rooms”. Buying the premises your practice operates from through an SMSF is one of the few strategies that lets a doctor pay rent to themselves, build the asset inside a 15% (or eventually 0%) tax environment, and keep it out of the reach of practice creditors. It is also one of the most heavily rule-bound things an SMSF can do, and 2026 has changed two of those rules.
Here is how it works, what changed on 10 August 2026, and the six places we see it go wrong.
Why the rooms are the one asset an SMSF can buy from you
The starting position in superannuation law is that an SMSF cannot acquire an asset from a member or a related party. That rule has a small number of exceptions, and the one that matters here is business real property: land and buildings used “wholly and exclusively” in one or more businesses, whoever runs them. An SMSF may buy business real property from a member at market value, and it may lease it back to the member’s practice without the property becoming an “in-house asset”, provided the lease is a genuine, enforceable one on arm’s-length terms.
Consulting rooms, a GP clinic, a day surgery, a dental surgery, a specialist suite in a medical centre: all are business real property while a business is being carried on from them. A residential unit you have started seeing patients in is a harder case, and a property with a flat upstairs that a family member lives in will generally fail the test unless the residential use is incidental to the business use. The ATO’s ruling on the point is detailed, and the “wholly and exclusively” wording is applied more literally than most people expect. Get a written opinion on the classification before you sign anything, because if the property is not business real property the acquisition from you is simply prohibited, and unwinding it is expensive.
The three ways the rooms get into the fund
The fund buys them from a third party. The cleanest route. The SMSF trustee contracts to buy the premises, from cash or with a limited recourse borrowing, and leases them to the practice. There is no CGT event for you, and the only related-party question is the lease.
The fund buys them from you. If you already own the rooms personally, in a company or in a family trust, the fund can buy them at market value. You will need an independent valuation, a sale contract, a settlement, and the fund needs the money. The fund can borrow to buy from a related party, subject to the borrowing rules below.
You contribute them. Instead of the fund paying you, you transfer the rooms in as an in-specie contribution. The value counts against your contribution caps. For 2026-27 the non-concessional cap is $130,000, with a three-year bring-forward of $390,000 available if you are under 75 and your total superannuation balance on 30 June 2026 was below $1.84 million. If the rooms are worth more than the cap allows, a common structure is part sale, part contribution: the fund pays you what it can, and the balance is contributed. Where the small business CGT concessions apply to the transfer, the 15-year exemption amount, or the retirement exemption amount (itself limited to $500,000), can instead be contributed under the lifetime CGT cap, currently $1,935,000, which sits outside the non-concessional cap entirely. That election has a form and a deadline: the CGT cap election must be given to the fund at or before the time the contribution is made. Give it afterwards and the contribution counts as non-concessional, with an excess contributions problem to follow.
Whichever of the last two routes you take, remember that you are disposing of the rooms. That is a CGT event for you, at market value, whether or not money changes hands. If you have owned the rooms for a long time the gain can be substantial, and the interaction with the 2027 CGT changes discussed below is worth a conversation before, not after, the transfer.
The stamp duty point that makes South Australia different
In several states, moving commercial premises into an SMSF costs stamp duty on the full market value, or a concession hedged with conditions. South Australia abolished conveyance duty on transfers of qualifying land from 1 July 2018, and qualifying land includes land used for commercial purposes. A transfer of consulting rooms to your SMSF, whether by sale or by contribution, is therefore generally not dutiable in South Australia.
The classification follows the land use code RevenueSA has assigned, and a mixed-use property, such as rooms with a residential component, has to go to the Commissioner for assessment with separate valuations, and duty can apply to the non-qualifying part. Check the code before you plan around a nil duty outcome. But for the ordinary case of a commercial suite, the absence of duty removes the single biggest cost that stops interstate doctors doing this, and it is one reason the strategy is more common in Adelaide than the national commentary suggests.
Land tax is the other state tax to think about. An SMSF is treated as an excluded trust for South Australian land tax, so the fund is assessed at the general rates rather than the higher trust rates, and its holdings are assessed separately from yours. In 2026-27 the general threshold is $936,000 of site value before any land tax is payable.
Borrowing: what changed on 10 August 2026
An SMSF can borrow to buy property only through a limited recourse borrowing arrangement: the property sits in a separate holding trust, the lender’s recourse is limited to that one asset, and the loan can be used for a single acquirable asset and its maintenance, not improvements that change its character.
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which received assent on 26 June, added a further condition in Schedule 5. For borrowing arrangements entered into from 10 August 2026, real property acquired under the arrangement must be business real property. Residential property can no longer be acquired under a new SMSF borrowing unless it happens to satisfy the business real property definition, which for a home or an ordinary rental is almost never the case. Arrangements entered into before 10 August are grandfathered, a purchase under a contract exchanged before 10 August is protected even if it settles afterwards, and a refinancing of a pre-existing loan over the same asset is permitted.
For doctors buying their rooms this is close to a non-event, because consulting rooms are business real property. The practical consequences are the ones at the margins. The Act tests the property when it is acquired and is silent on what happens if it later stops being business real property, and the ATO has not yet published a view. Until it does, treat a plan to convert part of a building to residential use, or to keep the rooms after the practice moves out and let them to a residential tenant, as something to avoid while the loan is on foot, or at least to take advice on first. Industry bodies have criticised the choice of “business real property” rather than “commercial property” as the test, but no amendment has been introduced and we would not plan around one.
Banks lend to SMSFs for commercial property, but at a higher rate and lower loan-to-value ratio than for a personal purchase, with a personal guarantee from the members. The alternative, which many doctors use, is a related-party loan: you, your practice company or your family trust lends to the fund. That is permitted, but only if the terms are arm’s length, and the ATO’s safe harbour in PCG 2016/5 sets what that means for real property: a maximum loan-to-value ratio of 70%, a term of no more than 15 years, monthly principal and interest repayments, a registered mortgage, and an interest rate set by reference to the RBA’s standard variable rate for investor housing loans in the May before the financial year. For 2026-27 that rate is 9.35%. You can depart from the safe harbour if you can show a bank would have lent on your terms, but the burden is on the fund and the penalty for getting it wrong is the one described next.
Non-arm’s-length income: the 45% trap
This is the rule that matters more than any other, and it is the one that a doctor’s understandable instinct to “help the fund” walks straight into.
Where an SMSF derives income under an arrangement that is not at arm’s length, or incurs less expense than it would have under an arm’s-length arrangement, the income is non-arm’s-length income and is taxed at 45%, not 15%, and not 0% in pension phase. Where the non-arm’s-length expense relates to a specific asset, every dollar of income from that asset, and the capital gain when it is eventually sold, is tainted.
The examples that catch medical practices are not exotic:
- The practice pays the fund below-market rent, or pays it late, or skips a quarter when cash is tight. The rent is non-arm’s-length income. Under-charging rent is the problem we see most often with related-party leases.
- A related-party loan to the fund at a concessional interest rate, or with no repayments, outside the safe harbour and without evidence a bank would have lent on those terms. The rental income and the eventual capital gain on the property are both taxed at 45%.
- The doctor’s spouse, who runs a building company, does the fit-out for free or at mates’ rates. That is a non-arm’s-length expense relating to a specific asset, and it taints the asset’s income permanently.
- The doctor, who happens to be a registered valuer or a licensed builder, provides the fund those services at no charge in that professional capacity.
There is a softer rule for general expenses, those not tied to a particular asset, legislated in 2024 and applying from the 2018-19 year onward: the amount taxed at 45% is capped at twice the shortfall. It does not help with a lease, a loan or a fit-out, because all three relate to a specific asset. The fix is simple and boring: a written lease at a rent supported by a valuation, reviewed annually; rent paid by direct debit on the due date; a loan that matches the safe harbour to the letter; and a paid invoice for every service the fund receives from anyone connected to you.
What the numbers look like inside the fund
Rent received by the fund while you are in accumulation phase is taxed at 15%. A capital gain on rooms held more than 12 months is taxed at an effective 10%, because super funds keep the one-third CGT discount; the 2027 move to indexation for individuals and trusts does not apply to superannuation funds. Once you retire and move the rooms into pension phase, the rent and any gain supporting that pension are tax-free, up to the transfer balance cap of $2.1 million per member.
On the other side of the ledger, the practice deducts the rent at its marginal rate, which for a company is 25% and for a trust distributing to a specialist is up to 47%. That gap between the deduction and the tax on the income is the arithmetic of the strategy.
Division 296 changes the arithmetic at the top end. From 1 July 2026 an additional 15% applies to the share of a fund’s realised earnings attributable to a member’s balance above $3 million, and a further 10% above $10 million. Because the tax is now on realised earnings rather than on growth in balance, holding the rooms does not trigger it; selling them does. For a doctor whose balance is already near $3 million, adding a property worth $1.5 million to the fund brings the eventual sale of that property into the Division 296 net, and because the fund’s other assets may be a modest cash balance, there is a liquidity question about how the fund pays the tax and the pension without selling the rooms. We wrote about the mechanics in our Division 296 article; the short version is that the property strategy still works below $3 million and needs modelling above it.
GST is often overlooked. Commercial rent is a taxable supply. If the fund’s GST turnover, which includes the rent, is $75,000 or more it must register for GST, charge it on the rent (the practice claims it back), and lodge activity statements. If the fund is registered it can also claim the GST on the purchase price where the vendor charged it, or acquire the premises GST-free as a going concern if bought tenanted with the lease in place. An unregistered fund paying $1.2 million GST-inclusive for the rooms has left about $109,000 on the table.
Where it goes wrong: six things we see
- No lease, or a lease that nobody follows. The property is in the fund, the practice uses it, and rent is paid “when we get to it”. That is a non-arm’s-length arrangement and an in-house asset problem at the same time. The lease is not paperwork; it is the thing that makes the whole structure legal.
- Rent set by the accountant in 2019 and never reviewed. Market rent moves. The fund’s auditor must be satisfied the rent is at market every year, and the ATO has made market valuation evidence one of its stated SMSF audit focus areas for 2026-27. A short letter from a commercial agent each year is cheap insurance.
- The fund pays for improvements out of borrowed money. Under a limited recourse borrowing, borrowed funds can pay for repairs and maintenance but not improvements. A new consulting wing funded by the loan breaches the arrangement. Fund improvements from the fund’s own cash, or have the tenant do the fit-out under the lease and own the fit-out separately.
- Contributing the rooms without checking the caps. An in-specie contribution of $700,000 of rooms by a doctor who has already used the bring-forward is an excess non-concessional contribution of several hundred thousand dollars, with a release and associated earnings tax to follow. Check the total superannuation balance and the caps before the transfer, and check whether the CGT cap election is available.
- Everything in one asset. A fund with rooms worth $1.4 million and $60,000 of cash has a concentration problem, a liquidity problem when a pension has to be paid, and a serious problem when a member dies and a death benefit has to be paid to an adult child who is not a dependant. Death benefits to non-dependants cannot stay in the fund; if there is no cash, the rooms are sold, probably at a bad time.
- Forgetting the sole purpose test. The fund exists to provide retirement benefits. Buying the rooms because the practice needs somewhere to operate is a legitimate investment decision if the return is commercial; buying them so the practice can have cheap premises is not. The trustees’ minutes should record the investment case, and the fund’s investment strategy should contemplate a single large property holding.
How it fits with selling the practice
Doctors who own their rooms in the fund find the eventual practice sale easier, not harder. The buyer takes the practice and signs a new lease with the fund. You stop being the tenant and remain the landlord, with a tenant who has just paid for the goodwill and is unlikely to move. The rooms can be sold to the buyer later, or held into pension phase and sold tax-free, or transferred out in specie when the fund is wound up.
If you own the rooms personally and are planning to sell the practice before 1 July 2027, the sequencing matters: the small business CGT concessions may apply to the rooms as well as to the goodwill, and the CGT cap contribution can move a large part of the sale proceeds into super outside the ordinary caps. We covered that in our guide to selling a medical practice before the 2027 CGT changes. The rooms-into-super question and the practice-sale question are the same conversation.
Is it right for you?
The doctors for whom this works well have a stable practice that will need the premises for a decade or more, a fund with enough cash or contribution capacity to buy without borrowing the maximum, and a total superannuation balance comfortably below $3 million. The doctors for whom it works badly have a lease their practice cannot really afford, a fund that will be 90% one building, or a plan to retire in three years and sell the rooms into a market they do not control.
It is a superannuation decision, a property decision and a practice decision at once, and the accountant, the financial adviser and the lawyer all need to be in the room. We can be all three of the first two.
Talk to us
We act for medical and dental practices across Adelaide and regional South Australia, and we administer and advise on the self-managed super funds behind many of them. If you own your rooms, are about to buy them, or have a fund that already holds them and has not had the lease looked at for a while, talk to us before the next audit.
You can read more on our accountants for medical professionals page and our self-managed super fund page. Related guides: our article on superannuation for Adelaide doctors, and our explainer on the Division 296 tax on balances over $3 million.
Get in touch with our Adelaide team to talk through your rooms.
This article is general information only and was prepared in September 2026. It is general advice and does not take account of your objectives, financial situation or needs, and it is not a recommendation to acquire, dispose of or alter any superannuation or financial product, or to acquire any property or enter into any borrowing. Superannuation, property and borrowing decisions have long-term consequences and the rules described here, including the limited recourse borrowing rules and the contribution caps, are subject to change. You should consider obtaining personal advice, and read the relevant product disclosure statement, before making any decision.
