Commercial property could be an option to broaden your investment portfolio.
With recent Federal Budget changes to residential property investment rules, some Australians may be reviewing whether commercial assets have a role in their investment strategy. Whether it’s the right choice for you depends on your individual circumstances, so it’s important to seek professional advice before making any decisions.
In this article
- Recent Federal Budget changes are reshaping property investment, with new rules affecting negative gearing and the use of self-managed super funds (SMSF) for residential properties.
- Commercial property offers a range of investment benefits. Depending on the asset, these can include portfolio diversification, longer lease terms and rental increases built into some commercial leases.
- Commercial property loans suit a range of borrower scenarios. From experienced investors and business owners to SMSF trustees, there are several scenarios where a commercial loan may work for you.
Why are investors considering commercial property?
The recent Federal Budget changes are focused on residential property investment, particularly SMSF borrowing and negative gearing for established residential investment properties.
As commercial property is treated differently under these reforms, investors may be asking whether it could play a role in their portfolio. For some borrowers, commercial property may offer investment opportunities that differ from residential property, with different tax implications.
Changes to LRBAs
From 10 August 2026, new rules will affect the use of Limited Recourse Borrowing Arrangements (LRBAs) by SMSFs to purchase residential investment properties. The change affects one pathway some SMSF trustees may previously have considered when using their superannuation to invest in property.
The changes do not apply to borrowing through an SMSF to purchase commercial property for business purposes.
Changes to negative gearing
From 1 July 2027, negative gearing rules will change for residential investment properties. While there are some exceptions, many residential property investors will no longer be able to offset rental losses against their salary or other taxable income.
Situation 1: Buying an established investment property
Current rule: Rental losses can generally be used to reduce taxable income, including salary, depending on the investor’s circumstances.
New rule: From 1 July 2027, if you acquired an established residential investment property after Budget night 7:30pm AEST 12 May 2026, you can no longer use rental losses to reduce your salary or other income.
Situation 2: Buying a new build investment property
Current rule: You can negatively gear the property.
New rule: No change. Eligible new builds can still receive existing negative gearing treatment.
Situation 3: Already own an investment property
Current rule: You keep the current negative gearing rules.
New rule: No change if you owned the property (or exchanged contracts) before the reforms were announced in May 2026. You can continue to negatively gear that property until you sell it.
Commercial property is not affected in the same way, which may lead some investors to consider whether it suits their goals, borrowing position and long-term strategy.
Can commercial property diversify an investment portfolio?
Some investors may use commercial property to diversify their investment portfolios because it often behaves differently from residential property and other asset classes. Its role in a portfolio will depend on the type of asset, location, tenant profile, lease terms and the investor’s broader strategy.
Some of the potential diversification benefits include:
- Access to different property sectors such as office, industrial, retail or healthcare, each with its own demand drivers.
- Rental income that may be supported by longer lease terms than are common in residential property.
- Reduced concentration risk if your existing portfolio is heavily weighted towards residential property or equities.
- Potential inflation protection, as some commercial leases include rent reviews linked to CPI or fixed annual increases.
That said, commercial property may not always be suitable for an investment portfolio and it comes with different considerations:
- Vacancies can last longer, which may result in periods without rental income.
- Tenants may require specialised fit-outs or incentives.
- Property values can be more sensitive to business conditions and interest rates.
- Lending requirements, deposits and ongoing costs can differ from residential property.
Before making any decision to add a commercial property, you should seek professional tax and accounting advice.
What type of investors may consider a commercial property loan?
Generally, commercial property loans can be relevant for borrowers looking to purchase or refinance commercial real estate as part of their broader business or investment strategy.
Common borrower scenarios typically include:
- Experienced property investors looking to diversify beyond residential property
- Business owners purchasing premises to occupy or lease
- SMSF trustees looking to invest in commercial property as part of their retirement strategy (subject to lending criteria and superannuation rules)
- Individuals and family groups building a portfolio of income-producing assets
- Investors refinancing an existing commercial property to access equity or secure more suitable loan terms
- Developers acquiring offices, warehouses, retail, industrial or mixed-use properties with a long-term business focus.
Is commercial property the next step for your investment portfolio?
It could be. Commercial property can offer opportunities to diversify your portfolio. However, every investor’s circumstances are different. Before making a decision, consider your financial goals, investment strategy, cash flow and appetite for risk. Taking the time to understand your options and seeking professional advice can help you determine whether commercial property is the right fit for your portfolio.
Why consider MA Money for a commercial loan?
Commercial lending isn’t one-size-fits-all. We know that every borrower is unique, which is why we take a flexible, merit-based approach to each application, across a wide range of scenarios. Our goal is simple: more loans for more situations.
MA Money Commercial Loans are available through accredited mortgage brokers, who can help you understand your options and guide you through the application process. You can find a mortgage broker through the MA Money website.
This article provides general information only and does not constitute financial, tax, or legal advice. It does not take into account your personal objectives, financial situation, or needs. The examples and case studies used in this article are for illustrative purposes only and outcome may vary. You should seek independent advice from a licensed professional before making any financial decisions. Applications for credit are subject to eligibility and lending criteria. Fees, charges, T&Cs apply (available on request). MA Money Financial Services Pty Ltd ACN 639 174 315 Australian Credit Licence 522267.
