Key Takeaways
- The trade-off: Leasing keeps cash free and stays flexible; owning builds equity and gives you control over your premises for the long term.
- The long view: Over 10, 15 or 20 years, buying can work out cheaper than leasing, though it ties up capital and carries market risk.
- The structure: Many practitioners hold premises in a self-managed super fund and lease them back to the practice at market rent.
- The tax angle: SMSF rental income is taxed at a concessional 15% in accumulation phase, and capital gains can be nil in pension phase.
- The 2026 shift: Division 296 super tax on balances over $3M starts 1 July 2026, so high-balance owners should model the structure with an accountant first.
Why this decision matters
If you run a medical, dental or allied health practice, your premises are one of your biggest fixed commitments. The choice between leasing and owning shapes your cash flow, your tax position and your wealth for the length of your career, so it is worth treating as a strategic decision rather than a default.
There is a common perception that leasing is simply cheaper, but that is not always true over the long run. As Avant Finance notes, doctors who lease their premises may find that over periods of 10, 15 or 20 years it works out cheaper to buy. Owning also removes the risk of a landlord declining to renew, being slow with repairs, or lifting the rent, and it protects the expensive fit-out you would otherwise have to redo if forced to move.
The right answer depends on your stage of career, your capital position and how settled your location is. The framework below helps you weigh it.
Leasing vs owning at a glance
Each path suits different circumstances. The table below sets out the main trade-offs:
| Factor | Leasing | Owning |
|---|---|---|
| Upfront capital | Low, preserves cash | Deposit and setup costs required |
| Flexibility | Easy to relocate at lease end | Committed to the location |
| Security of tenure | Subject to landlord and renewal | You control the premises |
| Wealth building | Rent builds landlord's equity | Builds your own asset and equity |
| Long-term cost | Can exceed buying over decades | Often cheaper over 10 to 20 years |
Lease when you are early in your career, unsure of your long-term location, or want to keep capital free for growing the practice itself. Flexibility has real value when the future is uncertain.
Buy when you are established, settled in your area, and want to build an asset rather than fund someone else's. Owning your rooms is an investment in yourself rather than in a landlord's portfolio.
The SMSF route and its tax appeal
One reason owning is so common among health professionals is the ability to hold premises in a self-managed super fund. The fund buys the property and leases it back to your practice at market rent, and the tax treatment is a genuine draw:
- Concessional rental income: Rent received by the SMSF is generally taxed at 15% in accumulation phase, well below many practitioners' personal rates, per William Buck.
- Deductible rent: The practice claims the market-rate rent it pays as a business deduction, so the money stays within your own structure.
- Capital gains treatment: If the SMSF sells the property in pension phase, capital gains can be reduced to zero, or discounted in accumulation phase after 12 months.
- Asset protection: Assets held in a compliant SMSF are typically better protected from creditors in the event of business or legal difficulty.
There are strict rules. The arrangement must be at arm's length on market terms, and borrowing must use a limited recourse borrowing arrangement (LRBA) through a bare trust to buy a single asset in one transaction. Getting the structure wrong carries severe penalties, so specialist legal and financial advice is essential.
Financing and the 2026 changes
Health professionals are treated favourably by lenders, which shapes what owning actually costs:
- Competitive rates and LVRs: Owner-occupier medical property commonly attracts LVR ceilings around 65 to 80%, with specialist medical lenders sometimes going higher for established practices.
- SMSF deposit requirements: Lenders typically want a larger deposit for commercial property inside an SMSF, often around 35%, and the LRBA panel is smaller than standard commercial lending.
- Division 296 from July 2026: A new super tax on balances over $3M takes effect 1 July 2026, a fresh variable for high-balance owners weighing the SMSF version of this strategy.
- Separate fit-out funding: Some lenders fund the property purchase and the fit-out and equipment separately, which matters when you are setting up or expanding.
Because tax rules and thresholds change, treat the numbers as a confirm-with-your-accountant exercise rather than a fixed calculation, especially where an SMSF is involved.
A realistic scenario
Consider a GP whose lease is expiring who wants to expand into a larger, one-stop practice with allied health under the same roof. Renewing the lease would keep things simple but leave the rent building someone else's wealth and the location at a landlord's discretion.
Instead, on their accountant's advice, they buy a suitable commercial property through their SMSF and arrange separate finance for the new fit-out and equipment. The practice pays market rent into the fund, the rent is taxed concessionally inside super, and the premises become a long-term retirement asset that also lets them sub-let spare rooms to a complementary provider. The transition takes planning, including a period of overlapping rent, but the practice ends up owning its future rather than renting it.
Frequently asked questions
Is it really cheaper to buy than lease?
Over long horizons of 10 to 20 years it often can be, because rent tends to rise while a loan is eventually paid off. But buying ties up capital and carries market risk, so the answer depends on your circumstances and time horizon.
Why hold the premises in an SMSF?
The concessional 15% tax on rental income and potential nil capital gains tax in pension phase make it structurally attractive for higher earners. It also keeps rent within your own wealth structure rather than paying an external landlord.
Can an SMSF borrow to buy the property?
Yes, through a limited recourse borrowing arrangement, which secures the loan against the specific property and quarantines it from the fund's other assets. It has strict compliance rules and must be set up correctly before purchase.
What does Division 296 mean for me?
From 1 July 2026 it applies an additional tax to super balances over $3M, which can affect the SMSF version of this strategy for high-balance members. Model it with your accountant before committing.
Should I lease if I am early in my career?
Often yes, since flexibility and preserving capital matter most when your long-term location and growth path are still uncertain. You can revisit owning once the practice and your position are established.
What matters most
Owning versus leasing your practice space comes down to your career stage, your capital, and how settled you are. Leasing protects flexibility and cash; owning, often through an SMSF, builds a tax-effective long-term asset and gives you control of your premises. The decisions that matter are matching the choice to your horizon, structuring any SMSF purchase correctly with specialist advice, and factoring in 2026 changes like Division 296 before you commit. Get the structure right and the premises become part of your wealth rather than just a cost of doing business.
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