Buying Your Business Premises: Personal Name, Company, Trust or SMSF?

If you are buying the building your business operates from, the most important decision is not the price. It is who owns the building. Personal name, a company, a trust and an SMSF each change how the purchase is funded, how exposed the property is if the business gets into trouble, where the rent ends up, and what happens when you eventually sell or step back. Changing your mind after settlement usually means paying stamp duty again and possibly triggering capital gains tax, so this is a decision to make before you sign, not after.

This guide sets out the questions I would want answered for each option. It is general information, not advice for your situation, and the right answer depends on your numbers.

First principle: keep the building out of the trading business

Whatever structure you choose, there is a strong case for the premises not sitting in the same entity that runs the business. The trading entity is the one that signs supplier contracts, employs staff and carries the commercial risk. If it fails, everything it owns is available to its creditors, including a building that may have taken you twenty years to pay off.

The common approach is for the building to be held by a separate owner, which then leases it to the business on a written lease at market rent. The business pays rent, the rent is generally deductible to the business, and the building sits one step removed from the trading risk. Which separate owner you choose is where the four options differ.

Option 1: Personal name

Owning the premises yourself is the simplest structure. There is no extra entity to set up or maintain, rent from your business is taxed at your marginal rate, and interest on the loan is generally deductible against that rent.

The drawbacks are exposure and tax rate. A building in your own name is exposed to your personal creditors, and business owners often sign personal guarantees for finance and leases. At higher income levels the rent is taxed at up to 47% including the Medicare levy.

On exit, an individual is currently eligible for the 50% CGT discount after 12 months. From 1 July 2027 that is replaced by indexation for gains accruing from that date, with transitional rules for gains built up before then, as I explain in my guide to CGT indexation from 2027. Because the building is used in your business, it may also qualify as an active asset for the small business CGT concessions in Division 152 of the Income Tax Assessment Act 1997, where the asset is used in a business carried on by you, your affiliate or an entity connected with you (s 152-40). Those concessions can reduce or eliminate the gain, but the eligibility conditions are detailed and need checking before you rely on them.

Option 2: A separate company

A property-holding company gives a flat rate on retained profit and separates the building from you personally. The rate is usually not the 25% people expect. Rent is passive income, so a company that mainly earns rent will generally not qualify as a base rate entity and will pay 30%, as the ATO's company tax rates guidance explains.

The bigger issue is exit. A company does not receive the CGT discount, so a long-held building sold by a company is taxed on the full gain, and getting the profit out to you later means franked dividends or loans that must comply with Division 7A. A company can suit an owner who expects to hold the building indefinitely and keep the rent inside the company. It rarely suits someone who expects to sell.

Option 3: A discretionary trust

A family trust can hold the building and distribute the net rent, and any capital gain, to beneficiaries each year. That flexibility is the main attraction, along with stronger asset protection than personal ownership. The trust is eligible for the CGT discount on assets held more than 12 months, subject to the same 2027 changes as individuals.

There are trade-offs. Losses stay in the trust and cannot be distributed. Distributions must reflect who genuinely benefits from them, and the ATO's section 100A guidance applies to arrangements where they don't. In NSW, a discretionary trust is generally a special trust for land tax purposes and does not receive the land tax threshold, which matters on commercial land with a high land value. Model land tax before choosing a trust in NSW.

Option 4: Your SMSF

The SMSF is the option most specific to business premises, because the super rules treat business real property differently from almost every other asset. A fund can acquire business real property from a related party (section 66(2)(b) of the Superannuation Industry (Supervision) Act 1993), and a lease of business real property to a related party is excluded from the in-house asset limit (s 71(1)(g)). That means your fund can own the building and lease it to your business, provided the property is used wholly and exclusively in a business, as set out in ATO ruling SMSFR 2009/1.

The rent is taxed at 15% in accumulation phase and may be exempt to the extent it supports retirement-phase pensions. Borrowing remains available: since 10 August 2026, a new limited recourse borrowing arrangement over real property can only be used for business real property, and the ATO has confirmed LRBAs are not banned for this purpose. My guides to commercial property in an SMSF and SMSF borrowing rules cover the mechanics.

The risks are concentration and liquidity. If the building is a large share of the fund, the fund and the business now depend on each other. If the business struggles, the tenant your retirement relies on is the one that can't pay. Rent must stay at market and be paid on time, every time, and borrowed money cannot be used to improve the property.

The four questions to compare before you commit

• Funding. Where is the deposit coming from? Money taken out of your company to fund a purchase in another name can be a dividend, a loan or remuneration, and each has different tax consequences, including Division 7A. Lenders also assess each structure differently.
• Commercial exposure. Who can reach the building if the business fails, or if you have signed personal guarantees? The answer is different in each structure.
• Cash flow. Will the rent cover the loan repayments, land tax, insurance and maintenance in the owning entity, and can the business afford a market rent in a bad year as well as a good one?
• Exit. Will you sell the building with the business, sell it separately, keep it as an investment, or pass it to family? The CGT outcome, the availability of the small business concessions, and the land tax along the way differ by structure.

Two transaction costs apply whichever way you go. Stamp duty is payable on the purchase, and generally again on market value if you later transfer the building into a different structure. GST may apply to the purchase of commercial property, although a sale of an already-tenanted building can sometimes be GST-free as a going concern if the conditions are met. Both need to be checked on the contract before exchange.

For a broader comparison of these structures for investment property generally, see my guide to investment property structure in Australia.

Frequently asked questions

Buying premises and want to test the structures against your own numbers? Apply for a Strategy Session.