SMSF Property Case Study: How a GP Couple Used Their SMSF to Buy Their Practice Premises product guide
1Group Property Advisory SMSF Property Case Study: How a GP Couple Used Their SMSF to Buy Their Practice Premises
An illustrative case study showing the full lifecycle of an SMSF business real property strategy — from fund establishment to five-year financial outcomes — for Australian healthcare workers at the decision stage.
Reading about SMSF rules is one thing. Watching those rules translate into actual financial outcomes — with real numbers, documented compliance steps, and verified lessons learned — is something else entirely. For Australian GPs and other self-employed healthcare professionals, the strategy of using your SMSF to purchase your clinic premises and lease it back to your operating practice is one of the most powerful wealth-building tools available to you. It's also one of the most misunderstood.
1Group Property Advisory works exclusively with healthcare professionals navigating these complex property investment decisions. We provide specialist, conflict-free guidance on SMSF property strategies that align with both your practice operations and your long-term wealth creation goals. This case study follows an illustrative GP couple through the complete lifecycle of that strategy: from the decision to establish a corporate-trustee SMSF, through the LRBA acquisition of their clinic building, to the tax and compliance outcomes over a five-year period.
The scenario is illustrative — the names and specific figures are constructed for clarity — but every structural element, compliance step, and financial modelling assumption is grounded in current ATO rules and verified market data. It's designed to make the abstract tangible for you as a healthcare professional at the decision stage.
Meet the Scenario: Dr. Sarah and Dr. James Okafor
Dr. Sarah Okafor (48) and Dr. James Okafor (51) are GPs who co-own a mixed-billing general practice in suburban Brisbane. Their practice operates from leased commercial premises — a 280-square-metre suite — at a market rent of $78,000 per year. They've been paying that rent to a third-party landlord for nine years.
At the time of our scenario's starting point (July 2022):
- Dr. Sarah's super balance: $420,000 (held in a retail industry fund)
- Dr. James's super balance: $510,000 (held in a retail industry fund)
- Combined rollover balance: $930,000
- Practice structure: Partnership operating as a company (Okafor Medical Pty Ltd)
- Target property: Their existing clinic premises, listed for sale by the building owner at $1,050,000
Their accountant and a licensed SMSF adviser jointly recommended they explore whether the SMSF business real property strategy was appropriate for their specific circumstances — and if so, how to execute it compliantly.
Why This Strategy Made Sense for Them
Before a single document was drafted, the Okafors' adviser modelled the strategic logic. Three factors made this scenario particularly compelling:
- They were already paying market rent — $78,000 per year — to a third-party landlord. Under the SMSF strategy, that rent would flow into their own retirement fund instead.
- Their combined super balance of $930,000 was well above the threshold most specialists consider viable for SMSF property investment, given fixed compliance costs (see our guide on How Much Super Do Healthcare Workers Need to Make SMSF Property Investment Worthwhile?).
- The property qualified as business real property under the ATO's definition. The ATO generally defines land and buildings used wholly and exclusively in a business — and which satisfy the business use test — as business real property. A GP clinic used solely for the practice's operations passes this test clearly, which is what allows the SMSF to acquire it from or lease it to a related party — something residential property cannot do.
The adviser also stress-tested the risks: concentration (a single property would account for a significant portion of the fund), liquidity (the fund would need cash reserves to service the LRBA and cover ongoing costs), and compliance (the lease must be at market rates, independently verified). These risks were assessed as manageable given the Okafors' income, their ability to make concessional contributions, and the strong rental yield the property offered.
Step 1: Establishing the Corporate-Trustee SMSF
The Okafors chose a corporate trustee structure — the recommended approach for any SMSF that intends to hold property.
Statistics show a preference for a corporate trustee structure, with 72% of funds using a corporate trustee. For property-holding SMSFs specifically, the corporate structure provides cleaner asset separation, simpler title management if a member is added or removed, and avoids the administrative burden of updating property title registrations every time a trustee change occurs (see our guide on How to Set Up an SMSF to Buy Property as a Healthcare Worker: Step-by-Step).
Corporate trustee setup costs incurred:
| Item | Cost |
|---|---|
| ASIC registration of special purpose trustee company | $576 |
| Trust deed preparation (SMSF specialist solicitor) | $1,800 |
| ATO registration (ABN, TFN, Electronic Service Address) | Nil (included in service) |
| SMSF bank account establishment | Nil |
| Financial adviser fee (strategy SOA) | $3,500 |
| Total establishment cost | ~$5,876 |
SMSF setup costs in Australia range between $450 and $3,000 depending on chosen trustee structure and level of service, with corporate trustee setups ranging from $1,200 to $2,500 for full professional services including documentation. The Okafors' higher total reflects the inclusion of a comprehensive Statement of Advice from their licensed financial adviser — a non-negotiable cost for a strategy of this complexity.
From January 2025, SMSF trustees are required to acknowledge in writing that they have not received unlicensed investment advice, that they understand the compliance and risk obligations of SMSFs, and that they have a documented investment strategy aligned with fund goals. The Okafors' adviser ensured this documentation was embedded in their investment strategy from the outset.
The trust deed was drafted to expressly permit borrowing and the placement of a charge over fund assets — a requirement confirmed by industry compliance guidance: it is important to check that the trust deed allows borrowing and allows a charge to be placed over the fund asset that is being acquired under the LRBA.
Step 2: Rolling Over Existing Super Balances
Once the SMSF was registered, both Dr. Sarah and Dr. James submitted rollover requests to their respective retail industry funds. The combined $930,000 landed in the SMSF's dedicated bank account within 28 days.
Critical note on insurance: Both members had income protection and life insurance held within their industry funds. Their adviser flagged this as a priority — rolling over without first securing replacement cover would have left them uninsured during the transition window. Replacement policies were arranged before the rollovers were initiated (see our guide on SMSF Investment Strategy Requirements: How Healthcare Workers Must Document Property Decisions, which covers the obligation to account for member insurance needs in the written investment strategy).
Step 3: Establishing the Bare Trust and Obtaining LRBA Finance
A medical practitioner may use an LRBA to purchase a commercial property such as consulting rooms, which can then be rented back to the medical practice at commercial rates under a properly documented lease agreement.
To borrow money, the SMSF required a separate bare trust (also called a custodian or holding trust). The SMSF borrowing rules require the property asset to be held by a separate entity called a bare trust. The SMSF is the beneficiary of the trust, but the bare trustee — which cannot be the same as the SMSF trustee — acts as the registered holder of the property.
The Okafors' solicitor established a second special purpose company to act as bare trustee. ASIC charges $67 annually for the SMSF trustee company; if owning property via a bare trust, there is an additional ASIC fee for its trustee company of $329 annually.
LRBA structure at settlement (August 2022):
| Item | Amount |
|---|---|
| Purchase price | $1,050,000 |
| SMSF deposit (30% — funded from rollover) | $315,000 |
| LRBA loan (70% LVR) | $735,000 |
| Stamp duty (Queensland) | ~$38,850 |
| Legal and bare trust establishment | $4,200 |
| Lender establishment fee | $2,500 |
| Independent valuation (ATO arm's length requirement) | $1,800 |
| Total acquisition cost | ~$1,097,350 |
For a commercial property, an SMSF can borrow up to 70% of its value under an LRBA — meaning the Okafors' 70% LVR was at the maximum permitted limit. Their lender required personal guarantees from both members, which is standard practice.
The loan was structured with the lender at a variable rate of 7.2% per annum (a commercial SMSF rate available from a specialist non-bank lender in 2022, below the ATO's safe harbour rate). The current SMSF LRBA interest rates for 2024–25 are 9.35% for real properties under the ATO's safe harbour provisions — a rate the Okafors' adviser monitored carefully to ensure their related-party loan structure (if they had used one) would have remained compliant.
The cost of setting up an LRBA can be significant — typically between $3,000 and $10,000, but potentially even more in complex situations. The Okafors' LRBA setup costs totalled approximately $8,500, consistent with this range.
Post-settlement fund position:
| Item | Amount |
|---|---|
| Remaining cash in SMSF (after deposit + costs) | ~$576,650 |
| Property value (held in bare trust) | $1,050,000 |
| LRBA loan outstanding | $735,000 |
| Net SMSF assets | ~$891,650 |
Step 4: Executing the Commercial Lease
The lease between the bare trustee (as legal owner of the property) and Okafor Medical Pty Ltd was documented by the solicitor as a formal commercial lease at market rent. An independent commercial property valuer confirmed that $78,000 per annum — the same rent the practice had been paying its previous landlord — was within the market range for comparable premises in the suburb.
This step is non-negotiable. Commercial premises must be leased at the market rate — even if it's for your own business. Any discount to related parties would breach the ATO's arm's length rule and potentially the sole purpose test, exposing the fund to significant penalties.
Why the lease structure matters for your practice's tax position: The rent paid by Okafor Medical Pty Ltd to the SMSF was fully tax-deductible to the company at the corporate tax rate of 25% (as a base rate entity). Inside the SMSF, that same $78,000 was taxed at only 15% — the concessional superannuation rate. This tax rate differential is a core driver of the strategy's financial efficiency (see our guide on SMSF Property Tax Benefits for Australian Healthcare Workers: What You Actually Save).
Five-Year Financial Model: 2022–2027
The following is an illustrative five-year model using conservative assumptions: 5% annual commercial property capital growth, 0% rent escalation in Years 1–2 rising to 3% CPI-linked escalation from Year 3, and LRBA loan repayments of principal and interest at 7.2% over 15 years.
Annual Cash Flow (Year 1 — FY2022–23)
| Item | Amount |
|---|---|
| Rental income received by SMSF | $78,000 |
| LRBA interest component (Year 1) | ~$52,920 |
| LRBA principal repayment | ~$16,800 |
| SMSF accounting & audit | ~$4,500 |
| ATO supervisory levy | $259 |
| Property management / maintenance | $3,200 |
| ASIC annual fees (trustee + bare trust co.) | $396 |
| Net cash position (after all expenses) | ~$925 surplus |
The levy has been $259 since the 2014–15 financial year and remains the same for the current financial year. A key benefit for SMSF trustees is that the ATO SMSF supervisory levy is fully tax-deductible, meaning funds can claim it as a deduction when lodging their annual tax return, helping to reduce taxable income.
The fund's cash position was tight in Year 1 — deliberately so, because the Okafors had structured their concessional contributions to top up liquidity. Both contributed $27,500 each in concessional contributions (the 2022–23 cap), adding $55,000 per year in pre-tax dollars to the fund, taxed at 15% on receipt.
Five-Year Summary (Illustrative)
| Metric | FY2022–23 | FY2023–24 | FY2024–25 | FY2025–26 | FY2026–27 |
|---|---|---|---|---|---|
| Property value | $1,102,500 | $1,157,625 | $1,215,506 | $1,276,281 | $1,340,095 |
| Loan outstanding | $718,200 | $700,200 | $681,000 | $660,400 | $638,400 |
| Fund equity in property | $384,300 | $457,425 | $534,506 | $615,881 | $701,695 |
| Annual rent received | $78,000 | $78,000 | $80,340 | $82,750 | $85,232 |
| Tax on rental income (15%) | $11,700 | $11,700 | $12,051 | $12,413 | $12,785 |
| Concessional contributions (combined) | $55,000 | $55,000 | $55,000 | $55,000 | $55,000 |
By the end of Year 5 (June 2027), the fund's estimated total assets — property equity plus remaining cash and accumulated contributions — would be approximately $1.42 million, compared with an estimated $1.18 million had the Okafors remained in their industry funds earning a blended 7.5% return. The SMSF strategy produced an estimated $240,000 advantage over five years — driven primarily by the tax differential on rental income and the equity accumulation through the LRBA.
Important caveat: This model does not account for the higher compliance costs of the SMSF versus industry fund fees, nor for the opportunity cost of the $315,000 deposit that could have been invested elsewhere. Comprehensive modelling by a licensed adviser is essential before drawing conclusions applicable to your individual circumstances.
Compliance Steps That Could Not Be Skipped
The Okafors' adviser flagged five compliance steps that were non-negotiable throughout the five-year period:
1. Annual independent valuation of the property. The ATO requires SMSF assets to be valued at market value each year for reporting purposes. A formal valuation was obtained every three years; desktop valuations (from a qualified valuer) were used in intervening years.
2. Formal lease documentation, reviewed at each renewal. The lease was a genuine commercial lease with market rent reviewed annually against comparable properties. Any deviation from market rent would constitute a breach of the arm's length rule.
3. No improvements funded by borrowed money. In Year 3, the Okafors wanted to install new air-conditioning. The ATO rules prohibit alterations that change the character of the property until the loan is paid off, so major renovations are not permitted. If improvements are made to the property, you are not permitted to use borrowed funds; they must be paid for using money from the SMSF. The $18,000 air-conditioning upgrade was funded from the SMSF's cash reserves, not the LRBA, and was classified as a repair/improvement to the existing asset rather than a character-altering renovation.
4. Updated written investment strategy. The fund's investment strategy was reviewed annually and updated to reflect the property's concentration within the fund, as required by the ATO's investment strategy obligations (see our guide on SMSF Investment Strategy Requirements: How Healthcare Workers Must Document Property Decisions).
5. Annual SMSF audit by an ASIC-registered auditor. SMSFs must be audited each year by an ASIC-registered auditor, who is then required to report any non-compliance issues to the ATO. The Okafors' audit was completed by an SMSF-specialist firm with no connection to their accounting firm, maintaining the independence required by law.
What Happened When the Loan Was Repaid
The LRBA was structured over 15 years, but the Okafors modelled an accelerated repayment scenario. By making additional voluntary repayments from surplus rental income and contributions, they projected the loan could be extinguished by Year 11 (2033) rather than Year 15 (2037).
Once the loan is fully repaid, legal ownership of the property can revert to the SMSF trustee. At that point, the property moves from the bare trust directly into the SMSF's name, and crucially, the rental income continues flowing into the fund, but without any loan interest to offset. The fund's net cash position improves dramatically.
If the Okafors transition to pension phase before selling the property, any capital gain on the eventual sale would be tax-free within the transfer balance cap ($2 million for 2025–26), one of the most significant tax benefits available in the Australian system (see our guide on Transitioning Your SMSF Property to Pension Phase: A Healthcare Worker's Exit Strategy).
Lessons Learned: What the Okafors Would Do Differently
Reviewing the strategy at the five-year mark, their adviser identified four key lessons:
1. Start the liquidity buffer larger. The fund's cash position in Year 1 was uncomfortably thin. Had a major maintenance issue arisen, or had either doctor taken extended leave, reducing their ability to make contributions, the fund could have faced a cash shortfall. A larger liquidity buffer of at least 10–15% of the property value is now recommended.
2. Secure insurance replacement before initiating rollovers. The Okafors managed this correctly, but only because their adviser flagged it. Many healthcare professionals overlook this step and find themselves uninsured for weeks or months during the rollover process.
3. Budget for stamp duty on title transfer. If the property is acquired through a limited recourse borrowing arrangement, stamp duty may apply twice — once when the bare trust initially holds the property and again when the SMSF takes full ownership. In Queensland, the second stamp duty event on title transfer from the bare trustee to the SMSF trustee can be significant. The Okafors' solicitor structured the bare trust correctly to minimise, but not eliminate, this cost.
4. Monitor Division 296 implications. With strong capital growth, the Okafors' combined SMSF balance is tracking to approach $3 million by the time they reach their late 50s. The proposed Division 296 tax would impose an additional 15% tax on earnings attributable to balances above $3 million, including unrealised property gains. Proactive contribution pacing and pension-phase timing strategies are now being modelled (see our guide on SMSF Property and the Division 296 Tax: What High-Earning Healthcare Workers Need to Know).
Key Takeaways for Healthcare Professionals
The business real property strategy is uniquely powerful for GP practice owners. Redirecting rent from a third-party landlord into your own SMSF converts a practice expense into a retirement asset, a structural advantage unavailable to employees.
The LRBA structure is non-negotiable and complex. The three-party arrangement (SMSF, bare trust, lender) must be established correctly before any property contract is signed. Errors in structure can invalidate the borrowing entirely.
Compliance is continuous, not a one-time event. Market-rate leases, annual valuations, independent audits, and updated investment strategies are recurring obligations, not optional extras. Your due diligence doesn't end at settlement.
Liquidity planning is the most commonly underestimated risk. A fund with $930,000 in combined balances and a $735,000 loan has significantly less free cash than it appears. Ongoing concessional contributions are essential to maintaining fund solvency.
The tax efficiency advantage compounds over time. The 15% tax rate on rental income, versus marginal rates of up to 47% outside super, creates a growing advantage that accelerates as the loan is repaid and rental income increases with CPI. This is long-term wealth creation through strategic property investment, not short-term speculation.
Conclusion
The Okafors' case illustrates what makes the SMSF business real property strategy genuinely distinctive for self-employed healthcare professionals: it transforms a practice operating cost into a retirement wealth-building mechanism, whilst delivering tax efficiency at every stage of the asset's lifecycle. But it also illustrates the strategy's demands in upfront cost, ongoing compliance discipline, and professional team quality.
As an independent buyer's agent, 1Group Property Advisory works exclusively with healthcare professionals navigating these complex SMSF property decisions with conflict-free advice. We work exclusively for you, never for vendors or developers, ensuring that every structural, compliance, and financial consideration is addressed with precision and strategic clarity. Our data-driven research and deep understanding of your unique position as a time-poor, high-income earner means we can guide you from your property brief through to settlement with confidence.
This case study is designed as a narrative anchor for the broader SMSF property investment pillar. If you're ready to evaluate whether this strategy is appropriate for your own circumstances, explore the foundational articles in this series: What Is an SMSF and Is It Right for Australian Healthcare Workers? to assess structural suitability; SMSF Limited Recourse Borrowing Arrangements (LRBA) Explained for Healthcare Workers for a deep dive into the borrowing mechanics; Buying a Medical or Allied Health Clinic Through Your SMSF: Rules and Strategy for the specific compliance framework around clinic acquisitions; and Choosing the Right SMSF Adviser, Accountant, and Lender as a Healthcare Worker for guidance on building the professional team that makes execution possible.
No SMSF property strategy should be implemented without advice from a licensed financial adviser (AFS licence holder) who specialises in SMSFs and understands the specific financial profile of healthcare professionals.
References
- Australian Taxation Office. "SMSF Supervisory Levy." ATO.gov.au, 2025. https://www.ato.gov.au/tax-rates-and-codes/smsf-supervisory-levy
- Australian Taxation Office. "Highlights: SMSF Quarterly Statistical Report, June 2025." ATO.gov.au, 2025. https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf/smsf-newsroom/highlights-smsf-quarterly-statistical-report-june-2025
- SuperGuide. "How to Buy a Commercial Property and Lease It Through Your SMSF." SuperGuide.com.au, March 2025. https://www.superguide.com.au/smsfs/10-steps-buying-commercial-property-leasing-smsf
- SuperGuide. "SMSF Statistics: 1.2 Million Members with $1 Trillion in Super." SuperGuide.com.au, 2025. https://www.superguide.com.au/smsfs/smsf-statistics
- SMSF Adviser. "Five-Year ATO Data Spread Shows Strong Growth for SMSF Sector." SMSFAdviser.com, December 2025. https://www.smsfadviser.com/five-year-ato-data-spread-shows-strong-growth-for-smsf-sector
- William Buck Australia. "Purchasing Your Practice Premises in Your SMSF." WilliamBuck.com, 2021. https://williambuck.com/news/business/health/purchasing-your-practice-premises-in-your-smsf/
- Pilbara Finance. "2025 SMSF Property Rules: What's Changed and What It Means for Investors." PilbaraFinance.com.au, July 2025. https://pilbarafinance.com.au/blog/2025-smsf-property-rules-whats-changed-and-what-it-means-for-investors/
- Grow SMSF. "ASIC Fees 2025." GrowSMSF.com.au, June 2025. https://growsmsf.com.au/asic-fees-2025/
- Liston Newton Advisory. "How to Invest in Commercial Property Through Your SMSF." ListonNewton.com.au, November 2025. https://www.listonnewton.com.au/information-centre/guide-for-getting-commercial-property-through-your-smsf
- Wayfinder Agency. "LRBA Borrowing Rules for SMSF Property Investing." WayfinderAgency.com.au, October 2024. https://wayfinderAgency.com.au/blog/lrba-borrowing-rules-for-smsf-property/
This article is part of the SMSF Property Investment for Australian Healthcare Workers content series. It provides general information only and does not constitute financial product advice. Healthcare professionals should seek advice from a licensed financial adviser before making any superannuation or investment decisions.