Commercial Property Loans for Owner-Occupiers: Buying Your Business Premises

Key takeaways

• Owner-occupier lending is assessed on the business: lenders add back the rent you stop paying and test whether profit covers the new debt with a margin.
• In the worked example, a $1,500,000 premises needs about $540,000 of cash and costs $105,700 a year to hold, against $90,000 of rent.
• Buying is a property investment decision as well as a premises one - it pays off through capital growth and fixed occupancy costs, not year-one savings.
• Most owners buy through a separate trust or company that leases to the business; an SMSF is possible, because premises used wholly in a business are business real property.
• The related-party lease should be written, at market rent, and long enough to support the loan.
• Duty is a state matter - Victoria now runs a separate commercial and industrial property tax regime for properties that enter it.

Should a business rent or buy its premises?

Owning removes the landlord: no rent reviews you cannot control, no risk of being asked to leave at lease expiry, and the freedom to fit out without negotiating. It also ties up cash the business may need, and concentrates the owners' wealth in one asset next to their business. The numbers below are illustrative only.

A business pays $90,000 a year in rent, plus outgoings. It can buy the premises for $1,500,000 with a loan at 70% of value ($1,050,000), a $450,000 deposit and an illustrative $90,000 of duty and purchase costs - $540,000 of cash in total.

Check the repayment: $1,050,000 over 240 monthly payments at 7.0% a year is $8,140.64 a month, or $97,688 a year. Only the interest and owner-only costs are a true cost; the $25,000 of principal builds equity. But the $540,000 could have earned something in the business or elsewhere - at an illustrative 5%, $27,000 a year. On that view buying costs more in year one ($72,700 + $8,000 + $27,000 = $107,700 against $90,000). It pays off if the property grows in value, if rent would have risen by more than the loan costs, or if security of tenure matters to the business. Model the security side in the commercial LVR and security calculator.

How do lenders assess an owner-occupier commercial loan?

Lenders look through the property to the business. The core test is whether the business's earnings cover all its debt repayments, including the new loan, with a margin - usually expressed as a debt service cover ratio (DSCR). The rent the business will no longer pay to a landlord is added back, because that cash now services the loan.

Continuing the example: the business earns $400,000 a year before interest, tax, depreciation and amortisation, after paying $90,000 of rent. Adding the rent back gives $490,000. The lender deducts tax and the owners' drawings, say $180,000, leaving $310,000 to service debt. The new loan costs $97,688 a year and existing equipment finance costs $60,000.

Lenders set their own minimum cover and their own buffer above the actual rate - indicatively a DSCR of around 1.25-1.5 times, varying by lender. APRA's 3 percentage point serviceability buffer is a setting for residential lending; commercial lenders choose their own sensitised rate. Pricing moves with the RBA's cash rate target, which was 4.60% from 30 September 2026; check the current target. You will usually need two years of financial statements and tax returns, current management accounts and an aged debtors and creditors list - our guide to cash flow forecasts lenders accept covers the forward-looking part.

Which entity should own the premises?

The SMSF route works for premises because the property is used in a business. Under the Superannuation Industry (Supervision) Act 1993, a fund with no more than six members may buy business real property from a related party at market value, and lease it to a related party without it counting as an in-house asset, provided it remains business real property throughout the lease. A new limited recourse borrowing arrangement entered from 10 August 2026 can only be used for business real property, so this route survives the August 2026 change. Our guide to SMSF loans and limited recourse borrowing explains the mechanics; get licensed financial advice before choosing it.

How much deposit do lenders want, and what LVR?

Indicatively, and varying widely by lender, borrower strength and property type:

The deposit is not the only cash. Add duty, legal costs, the valuation, any GST payable at settlement and fit-out. Some lenders will consider extra security, such as equity in a residence, to reduce the deposit - which puts that property at risk too. For more on how LVR and lease terms interact, see commercial property loans: LVR and lease doc.

How should the lease to your own business be written?

When a related entity owns the premises, the lease between it and your business matters to the lender, the valuer and the tax office:

• Put it in writing, signed and, where the term requires, registered. A handshake arrangement gives the valuer nothing to value.
• Set market rent, supported by a valuer or agent's opinion. Rent set high to inflate value or low to shift profit will be questioned - and for an SMSF, arm's length terms are a legal requirement under section 109 of the SIS Act.
• Match the term to the loan, or at least cover the first review period, with clear rent reviews and outgoings recovery.
• Expect a valuation discount. Many valuers and lenders look at the property's value with vacant possession, or discount a related-party lease, because the tenant and landlord are the same people. If the business fails, so does the lease.

What duty and GST apply when you buy premises?

This is general information, not tax or legal advice.

• Transfer duty is a state charge on the purchase. Revenue NSW notes that you generally must pay transfer duty when you buy a property, and every state has its own rates and concessions. Check the state revenue office before you sign, and budget duty as cash - lenders rarely fund it within the LVR.
• Victoria's commercial and industrial property tax. For commercial and industrial property that enters the reform through an entry transaction on or after 1 July 2024, duty is paid on that transaction, later transactions may be exempt from duty while the property keeps a qualifying use, and after a 10-year transition it pays an annual tax of 1% of its site value, per the State Revenue Office's guide to understanding commercial and industrial property tax. It also notes a government transition loan that can help eligible buyers fund the entry duty.
• GST. Commercial premises bought from a GST-registered seller usually carry GST. A sale can be GST-free as a going concern under section 38-325 of the GST Act only if the seller supplies everything needed to continue an enterprise - typically a leased property with its lease - so an owner-occupier buying vacant premises will usually pay GST at settlement and claim it back if registered. Ask whether the lender will fund the GST for that gap.

What mistakes do owner-occupiers make?

• Using working capital as the deposit. A business that empties its accounts to buy premises can then fail the lender's liquidity test, or struggle the first slow quarter.
• Buying a specialised building. Premises fitted out for one use are harder to value, lease or sell, and lenders discount them.
• Forgetting the business might move. If the business outgrows the site in three years, the property becomes an investment that must be leased to a stranger.
• Signing personal guarantees without reading them. See directors' guarantees and what you sign.
• Leaving the structure to the last week. The buying entity must be set up before the contract is signed; changing the purchaser later can cost a second round of duty.

When the business and the premises are ready, post one commercial property loan request on ADS and 200+ verified lenders and brokers can ask about it.

Frequently asked questions

How much deposit do I need to buy my business premises?

Indicatively, lenders often lend around 65-70% of value on owner-occupied commercial property, so plan for a 30-35% deposit plus duty, legal costs and any GST payable at settlement. Some lenders go higher for strong businesses, and some accept extra security such as equity in another property. Limits vary widely by lender, industry and property type.

Can my business pay rent to my own property trust?

Yes. Many owners buy premises in a separate trust or company and lease them to the business. The lease should be written, at market rent, with proper rent reviews and outgoings recovery. Lenders usually take cross guarantees from the business and personal guarantees from the directors, and assess the combined group's cash flow.

Can I buy my business premises through my SMSF?

Often, yes. Premises used wholly and exclusively in a business are business real property, which a fund with no more than six members can buy from a related party at market value and lease to the business on arm's length terms. A new limited recourse borrowing arrangement from 10 August 2026 can only be used for business real property. Get licensed advice first.

Do lenders use rent or business profit to assess an owner-occupier loan?

Mainly business profit. The lender adds back the rent the business no longer pays to a landlord, deducts tax and owners' drawings, then tests whether what remains covers all debt repayments with a margin. The rent between the property entity and the business is usually looked through, because the same people sit on both sides of the lease.

Is GST payable when buying commercial premises?

Usually, if the seller is registered for GST. A sale can be GST-free as a going concern only where the seller supplies everything needed to continue an enterprise, which typically means a leased property sold with its lease. An owner-occupier buying vacant premises usually pays GST at settlement and claims it back if registered. Ask your accountant before exchange.

Related reading

• Commercial Property Loans: LVR and Lease Doc
• SMSF Loans: Limited Recourse Borrowing Explained
• Secured Business Loans and Property Security

Sources

• Cash rate target — Reserve Bank of Australia
• Superannuation Industry (Supervision) Act 1993 - sections 66, 67A, 71 and 109 — Federal Register of Legislation
• APRA maintains current macroprudential policy settings (28 May 2026) — Australian Prudential Regulation Authority
• Transfer duty — Revenue NSW
• Understanding commercial and industrial property tax — State Revenue Office Victoria
• A New Tax System (Goods and Services Tax) Act 1999 - section 38-325, supply of a going concern — Federal Register of Legislation