Pay Clinical Rent to Your Super Fund at 15% Tax Instead of a Landlord
Medical consulting rooms qualify under the Business Real Property (BRP) exemption of Section 66(5) of the Superannuation Industry (Supervision) Act 1993 (SIS Act). This statutory rule allows your Self-Managed Super Fund (SMSF) to purchase your clinical practice real estate.
Your medical operating practice leases the consulting rooms from your SMSF at commercial market rates. Your practice claims a 100% tax deduction on rent, while your super fund pays only 15% tax on rental earnings (and 0% tax in retirement pension phase).
Using a Limited Recourse Borrowing Arrangement (LRBA), your super fund can borrow up to 75% to 80% LVR to acquire commercial consulting suites without risking your other super assets.
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| Property Strategy | Tax on Rent Paid | Tax on Capital Gain at Sale | Tenure Security |
|---|---|---|---|
| Third-Party Landlord Lease | Lost to Landlord | 0% Wealth Accrued | Vulnerable to Eviction |
| SMSF Consulting Room Freehold | 15% Capped Tax (0% in Pension) | 10% CGT (0% in Pension) | Permanent Clinic Tenure |
| Maximum LRBA Loan LVR | N/A | 75% - 80% LVR | High Leverage Efficiency |
| Asset Protection Level | Zero | Shielded from Medical Malpractice | Total Legal Protection |
1. Section 66(5) Business Real Property & Sole Purpose Compliance
Under the SIS Act, SMSF trustees are strictly prohibited from acquiring assets from related parties, with one critical statutory exception: Business Real Property (BRP) used wholly and exclusively for business purposes.
Medical consulting rooms, specialist suites, and dental clinics qualify 100% as BRP. Your practice pays rent directly to the SMSF under a formal commercial lease that satisfies the statutory Sole Purpose Test (Section 62).
2. Setting Up the Medical Bare Trust (Holding Trust)
Under Section 67A LRBA rules, the property must be held in a specialized Bare Trust (Holding Trust) until the loan is fully repaid:
- Corporate Trustee Mandate: Appointing a distinct corporate trustee for the Bare Trust separate from your SMSF trustee.
- Single Acquirable Asset Rule: Ensuring the commercial suite and associated car space are on a single title or unified contract.
- Limited Recourse Protection: If the loan defaults, the lender has zero claim against your fund's shares, cash, or other super assets.
- Member Contribution Servicing: Utilizing annual concessional super contributions ($30,000/year per member) to boost loan servicing power.
3. Transition to 0% Tax in Retirement Pension Phase
When you enter retirement or transition to pension phase (after age 60), your SMSF tax rate on rental income drops from 15% to 0%.
Furthermore, if you sell the consulting rooms while in pension phase, capital gains tax is completely eliminated (0% CGT), delivering massive tax-free capital accumulation.
Accredited Mortgage Specialists
Accredited credit representatives independently verified against the ASIC Professional Register. Governed by statutory Best Interests Duty (BID) with direct wholesale lender desk access.
David Chi Tran
Emerge Finance
Frequently Asked Questions: Buying Medical Consulting Rooms in SMSF: LRBA & Business Real Property Guide
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