Australia’s commercial property market has undergone a transformation over the past decade, particularly within the small and mid-tier investment space, driven in large part by SMSFs.
For years, self-managed super fund trustees, particularly business owners, have used commercial property as a tax-effective wealth-building tool. Many purchased their own premises inside their fund, which gives them rental stability while building long-term capital growth.
Industrial property became a standout, not just for yield but also for the control and certainty it offered compared to residential or equities. But now, that model is under threat.
The federal government’s proposed tax changes, targeting superannuation balances over $3 million, are poised to change the commercial landscape. The 30% tax on earnings above this threshold, controversially applied to unrealised gains, is already prompting action. As July 2025 approaches, we’re seeing early signs of restructuring, as SMSF trustees explore asset transfers, entity shifts, or outright sales to avoid tax liability.
It’s not just the tax itself. The fact that it applies to gains not yet realised creates a liquidity mismatch, especially for commercial property, which is typically held for the long term. Unlike equities, you can’t sell part of a warehouse to pay a tax bill.
This has created a sense of urgency among SMSF investors, many of whom own smaller-format industrial units, fringe offices, or strata retail. These segments could see increased listings over the coming 12 months.
Many business owners have used SMSFs to purchase their premises, allowing them to “pay rent to themselves” and lock in control over their operating space. That setup has been particularly common in the industrial sector, which boomed during and after the pandemic.
These owner-occupiers now face tough decisions. Do they retain the property in super and wear the tax hit? Or do they restructure, potentially incurring legal, tax, and stamp duty costs just to stay ahead?
We’re also hearing concerns from younger SMSF investors, those in their 40s and 50s, who may not be over the $3 million cap yet, but are well on track to breach it in the next 10 to 15 years. With no indexation of the cap, more people will be caught by what was initially described as a “high-net-worth” tax.
So what does all this mean for commercial property markets?
In the short term, it could create a ripple of selling, particularly in tightly held sectors like suburban industrial and metro office. These properties have traditionally been less volatile, with strong local tenant demand, long leases, and reliable income, especially when owned without debt inside super.
That selling may present opportunities for non-SMSF buyers like cashed-up investors, family offices, or those using different ownership structures. They may be able to secure assets at better yields than we’ve seen in recent years, especially if SMSF owners are motivated to sell for tax reasons rather than due to asset performance.
Longer term, we could see a more structural shift in how investors approach commercial real estate. Instead of funnelling funds through super, more may turn to direct ownership, unit trusts, or co-investment structures that provide flexibility and reduce exposure to future regulatory change.
This may also impact the types of assets in demand. Lease-backed income, discussed frequently in recent transcripts, could become even more attractive, as investors seek certainty in an increasingly uncertain policy environment.
Likewise, location fundamentals will matter more than ever. Areas with limited land supply, strong tenant demand, and tight vacancy, such as Melbourne’s southeast or key infill markets in Perth and Adelaide, could benefit from the shift in capital.
Ultimately, commercial property remains a great asset class. But as always, the game is changing. And those who adapt early, whether they’re SMSF trustees or new-generation investors, will likely be best positioned to benefit from what comes next.