There is no single commercial property deposit in Australia. Your upfront equity usually equals the gap between the purchase price and the lender-approved loan, based on the lender's accepted valuation, plus transfer duty, legal and valuation costs, GST timing where relevant, and a liquidity buffer. For example, if a lender approves 65% LVR on its accepted property value, your price contribution is 35% of that accepted value before those additional costs. LVR thresholds and lender requirements must be verified for your specific transaction and property type.
You have found an office, retail, or industrial property. The price looks right, the yield stacks up, and now you need to know whether your cash or available equity is actually enough before you put pen to paper. That question deserves a precise answer, not a guess.
The advertised price is only one input. Lender valuation, LVR policy, GST treatment, state or territory duty, due diligence costs, and a post-settlement reserve can all change the real number significantly. Getting this wrong before exchange is one of the most avoidable problems a commercial buyer can face.
This guide separates the contract deposit, the lender's equity requirement, total purchase costs, and the liquidity buffer so you can model each component before making an offer. It is general information only and does not replace independent finance, tax, legal, valuation, or SMSF advice.
What Is the Real Amount of Cash You Need to Buy Commercial Property?
Most buyers ask the wrong question. Knowing the deposit percentage is less useful than knowing the total capital you must have available, and verified, before you exchange contracts.
A commercial property transaction involves at least four distinct components: the contract deposit paid on exchange, the equity contribution required by the lender, the purchase costs paid to government and service providers, and the liquidity reserve retained after settlement. These are not the same amount, and they should not be treated as one figure.
Commercial Property Deposit Versus Total Equity Required
The contract deposit is the amount paid to the vendor's agent or solicitor on exchange, typically held in trust. It is usually a percentage of the purchase price and is agreed in the contract.
The total equity required is a different, usually larger, calculation. It includes the gap between the purchase price and the approved loan, any difference between the purchase price and the lender's accepted valuation, transaction costs, and the cash you retain for post-settlement obligations.
| Component | What it is | Who sets it |
|---|---|---|
| Contract deposit | Paid on exchange, held in trust | Contract and negotiation |
| Lender equity contribution | Purchase price minus approved loan amount | Lender, based on LVR and accepted valuation |
| Purchase costs | Duty, legal, valuation, due diligence | Government, advisers, lenders |
| Liquidity buffer | Cash kept after settlement | Buyer's own cash-flow model |
Why the Advertised Purchase Price Is Not the Full Funding Calculation
A commercial lender does not automatically use the purchase price as the security value. The lender orders an independent valuation and, in most cases, calculates the approved loan against whichever is lower: the purchase price or the lender's accepted valuation. If the valuation comes in below the agreed price, the buyer must fund the gap from their own resources.
Transaction costs, including state or territory transfer duty, legal fees, independent valuation fees, and due diligence reports, sit entirely outside the loan and must be funded separately. The APRA prudential framework defines LVR as the loan amount divided by the value of the property accepted as security, which makes the accepted valuation, not the contract price, the critical number.
How Does Commercial Property LVR Change the Deposit?
The loan-to-value ratio (LVR) is the proportion of the lender's accepted property value that the lender is willing to advance. The formula is straightforward: LVR equals the loan amount divided by the lender-accepted property value, expressed as a percentage.
As a reference point, CommBank's published Lease Doc product lists a maximum LVR of 65% for tenanted commercial investment properties assessed on rental income. This is a published product example, not a market-wide standard, and lender policies can change. Always confirm the current terms with the relevant lender before relying on published figures.
Illustrative Contribution Table at Different LVR Assumptions
The table below shows the arithmetic contribution required at four LVR levels on a $1,000,000 lender-accepted valuation. These are illustrations only, not guaranteed lender outcomes or product recommendations.
| LVR assumption | Max loan (illustrative) | Buyer contribution (illustrative) |
|---|---|---|
| 65% LVR | $650,000 | $350,000 |
| 70% LVR | $700,000 | $300,000 |
| 75% LVR | $750,000 | $250,000 |
| 80% LVR | $800,000 | $200,000 |
Purchase costs, GST timing, and the liquidity buffer are not included in the above figures. Each must be added separately to arrive at total cash required.
What Happens When the Lender Valuation Is Lower Than the Purchase Price?
This is one of the most common funding gaps buyers encounter, and one of the least planned for.
Consider a straightforward illustration. A buyer contracts to purchase a commercial property at $1,000,000. The lender's independent valuation comes in at $950,000. If the lender applies 65% LVR to its accepted valuation of $950,000, it will advance $617,500. The buyer must fund the remaining $382,500 from equity, plus all purchase costs on top.
Had the lender accepted the full contract price, the buyer at the same LVR would have needed $350,000 in equity. The $50,000 valuation shortfall transfers directly to the buyer and is not recoverable from the seller unless the contract includes a specific finance condition that addresses it. This is why arranging an independent property-specific valuation before exchanging is a practical step, not an optional one.
What Changes the Deposit for Office, Retail, Industrial, and Owner-Occupied Property?
Lenders do not assess every commercial buyer or every commercial asset in the same way. The funding calculation depends on the borrower type, the asset, the income evidence, the lease structure, and the lender's own credit policy at the time of application.
The table below outlines the key confirmation points by borrower scenario. These are not deposit guarantees; they are the items each borrower type should verify with a commercial finance broker, accountant, solicitor, and any relevant specialist before relying on an assumed LVR.
| Borrower scenario | Key items to confirm |
|---|---|
| Business owner buying premises (owner-occupier) | Borrower financials, business serviceability, asset suitability, permitted use, lender's owner-occupier policy |
| Investor buying tenanted commercial property | Lease terms, tenant covenant, WALE, net operating income, lender's income-coverage ratio, accepted valuation |
| Company or trust structure | Entity assessment criteria, lender's policy on corporate borrowers, guarantees required, legal and tax advice |
| SMSF buyer | SMSF eligibility rules (as updated from August 2026 for real property LRBAs), lender's SMSF product criteria, compliance advice from an SMSF specialist |
Owner-Occupier, Commercial Investor, Company or Trust, and SMSF Scenarios
A business owner buying their own premises is assessed differently from an investor buying a tenanted warehouse. The business owner's serviceability may be tied to the business's financial performance. An investor's assessment may weight the quality and length of the existing lease more heavily.
Borrowing through a company, unit trust, or family trust can affect how the lender assesses the loan, what guarantees are required, and how the equity contribution is structured. These are lending, tax, and legal questions that an accountant and solicitor should confirm for the specific structure before any commitment is made.
ASIC notes that commercial lending may carry a different level of consumer protection than residential lending, which is why understanding the loan terms and valuation provisions in the loan contract matters before signing.
Lease, Tenant, Income, and Asset-Quality Evidence
For tenanted commercial property, the quality of the lease can affect the lender's assessment. A long weighted average lease expiry (WALE), a creditworthy tenant, and a clear outgoings structure may support the income evidence a lender requires. An asset with short remaining lease terms, a casual tenant, or unclear permitted use may face more scrutiny.
Net operating income and the capitalisation rate used in the valuation can also influence the accepted property value, which in turn feeds back into the LVR calculation. These are not deposit inputs the buyer controls directly, but they are variables worth understanding before selecting a target asset.
Which Commercial Property Purchase Costs Sit Outside the Deposit?
Purchase costs are a separate funding requirement that sit entirely outside the commercial property loan and outside the contract deposit. They must be funded from the buyer's own resources and can vary meaningfully by state, transaction, asset, contract structure, and lender.
Planning a full commercial property due diligence process is essential. Buyers Agency Australia's commercial property due diligence checklist covers the title, lease, zoning, building, environmental, finance, and contract checks that inform how these costs are scoped and sequenced.
Transfer Duty, Legal Costs, Searches, Valuation, and Due Diligence
Transfer duty (sometimes called stamp duty in older state legislation) is a state and territory government charge on property transfers. Rates, thresholds, exemptions, and concessions differ by jurisdiction. For a transaction in New South Wales, Revenue NSW provides a duty calculator and current guidance. Buyers in other states and territories should consult the relevant state revenue authority for the applicable rate.
Beyond duty, the cost checklist for a commercial acquisition typically includes:
- Solicitor or conveyancer fees and title searches
- Independent lender valuation fee
- Building and pest inspection report
- Environmental or contamination assessment (relevant for industrial assets)
- Lender establishment and application fees
- Mortgage registration
Do not use a universal percentage to budget for these costs. The amounts depend on the state, asset, loan size, and scope of due diligence required.
GST, Going-Concern Treatment, and GST-Credit Timing
GST treatment on commercial property can significantly affect the cash required at settlement, and it is one of the most misunderstood funding variables in a commercial acquisition.
Commercial property sales by a GST-registered vendor are generally subject to 10% GST. However, the ATO's going-concern rules allow the supply to be treated as GST-free where all conditions are met: both parties must be GST-registered (or required to be), they must agree in writing that the sale is of a going concern, the vendor must supply everything necessary to continue the enterprise, and the vendor must carry on the enterprise until settlement.
Even where an accountant confirms that an eligible input tax credit may be available, a timing gap can exist. The credit is claimed in a future BAS cycle, not at settlement. A buyer who is required to fund GST at settlement and then recover it later must plan for that cash-flow gap as a separate item, distinct from the deposit, equity contribution, and other purchase costs.
GST treatment must be confirmed by a registered accountant or tax adviser before the contract is signed, not after.
How Do You Calculate Your Upfront Capital Before Making an Offer?
The formula below is a practical starting framework. The exact amounts must be calculated with the lender, accountant, and solicitor for your specific transaction.
A Simple Commercial Property Cash Requirement Formula
Estimated cash required = price contribution + verified purchase costs + valuation shortfall (if any) + GST timing requirement (if applicable) + liquidity reserve
Here is an illustrated example using a $1,000,000 purchase price and an assumed 65% LVR approved against the full contract price. This example is arithmetic only and excludes state-specific duty and transaction-specific costs, which must be calculated separately.
- Purchase price: $1,000,000
- Lender-approved loan at 65% LVR: $650,000
- Price contribution: $350,000
- Transfer duty (state-specific, check with your revenue office): to be confirmed
- Legal fees and searches: to be confirmed
- Independent valuation: to be confirmed
- Liquidity reserve (vacancy, repairs, initial outgoings): to be confirmed
- Estimated minimum cash before costs and reserve: $350,000
A valuation shortfall of, say, $50,000 would add that full amount to the buyer's required cash. A GST timing gap, if applicable, adds further. The Moneysmart property investment guide is a useful reference for understanding entry, holding, vacancy, and exit costs that sit beyond the initial purchase number.
Once you have modelled these numbers, book a free strategy session to discuss your budget, target asset, and acquisition structure with a buyer-side adviser before committing to an offer.
What to Confirm Before Signing or Paying a Contract Deposit
Before signing a commercial property contract or paying a contract deposit, confirm:
- Finance pre-approval or formal lender indication, including the LVR basis and income-coverage requirement
- Independent valuation or valuation risk assessment for the specific asset
- GST treatment confirmed in writing by a registered accountant
- Contract reviewed by a commercial solicitor or conveyancer, including settlement terms and conditions
- Transfer duty calculated by the relevant state revenue office or a solicitor
- Total cash available versus total cash required, including the reserve
How Buyers Agency Australia Can Support the Acquisition Decision
Buyers Agency Australia's investment approach is built around helping buyers move from a funding estimate to a funded, settled acquisition without the common gaps that cost money or delay settlement.
Knowing the deposit calculation is useful. Knowing whether the asset, the lease, and the lender's valuation will support it is the more important question.
When Buyer-Side Strategy and Due Diligence Coordination May Help
Dragan Dimovski, founder and property investment adviser at Buyers Agency Australia, approaches commercial acquisition across office, retail, and industrial assets through a structured process. The support available through commercial property acquisition support typically spans:
- Defining the acquisition brief including asset type, market, yield target, and structure
- Sourcing on-market and off-market opportunities that fit the brief
- Assessing lease, income, tenant covenant, and asset quality before an offer is made
- Coordinating specialist due diligence including building, environmental, legal, and valuation inputs
- Negotiating price and contract conditions on the buyer's behalf
- Supporting the buyer through to settlement
This does not replace a lender, valuer, solicitor, accountant, or SMSF adviser. Each specialist plays a distinct role in the transaction.
Buyers Agency Australia publishes this educational guide and provides buyer-side property advisory services. The information is general only and does not replace independent finance, tax, legal, valuation, building, environmental, or SMSF advice.
When This Is Not the Right Fit
A buyer with deep commercial property experience, a defined brief, sufficient time, and an established team of specialist advisers may prefer to manage the sourcing, due diligence, and negotiation independently. Buyer-side advisory support is most valuable when the buyer is entering a new asset class, a new market, or a complex lease situation where access, assessment, and negotiation skill add genuine value.
Frequently Asked Questions About Commercial Property Deposits
How much deposit do you need for a commercial property in Australia?
There is no single required percentage. The amount depends on the lender's LVR policy, the accepted valuation, the borrower type, the asset, purchase costs, GST treatment, and the liquidity reserve retained after settlement.
Is a 20% deposit enough to buy commercial property?
It may be enough under some lender and property assumptions, but it is not a universal rule. A 20% contribution corresponds to 80% LVR. Purchase costs, any valuation shortfall, and the post-settlement reserve sit entirely outside this figure and must be funded separately.
Does the commercial property deposit include stamp duty?
Usually, the contract deposit and transfer duty are separate components. Transfer duty is a state or territory government charge paid outside the loan and outside the contract deposit. A solicitor or conveyancer should confirm the treatment for the specific transaction.
What happens if the commercial property valuation is lower than the purchase price?
The lender may calculate its loan against the lower accepted value, leaving the buyer to fund the gap plus other costs. The exact method depends on the lender's credit policy, which should be confirmed before exchange.
Do I need to pay GST when buying commercial property?
GST treatment depends on the property, seller, buyer, contract, and transaction structure. Where the going-concern conditions are met, the supply may be GST-free. Where they are not, GST can apply to the full purchase price. Refer to ATO guidance and confirm with a registered accountant before signing.
Can I use equity in my home to buy commercial property?
Existing residential equity may form part of a funding strategy, subject to lender approval, serviceability, and the specific lending structure. Cross-collateralisation and repayment risk should be discussed with a commercial finance broker before proceeding.
Does buying through a company or trust change the commercial property deposit?
The entity structure can affect lender assessment, guarantee requirements, and advice obligations, but it does not create one universal deposit rule. An accountant, solicitor, and commercial finance broker should review the specific structure.
Can an SMSF buy commercial property?
An SMSF may be able to acquire certain commercial property in limited circumstances, but eligibility, borrowing, related-party, and compliance rules must be confirmed with an SMSF adviser and the relevant lender before proceeding. Note that from August 2026, new limited recourse borrowing arrangements for real property are limited to business real property.
What purchase costs should I budget besides the deposit?
Budget for state or territory transfer duty, legal and search costs, independent valuation, building and environmental due diligence, lender fees, GST timing where relevant, and a post-settlement reserve. A universal cost percentage is not appropriate given the variation by state, asset, and transaction.
How much cash should I keep after settlement?
There is no universal reserve amount because the right buffer depends on the asset, lease, borrower, debt level, and cash flow. Model the cost of vacancy, untenanted periods, insurance, rates, land tax, loan repayments, and repairs before settlement rather than working backward from a percentage.
Next Steps Before You Commit Capital
Committing capital to a commercial property acquisition is a process, not a single decision. Work through these five steps before signing:
- Confirm the target asset, use, market, and ownership structure with a solicitor, accountant, and finance broker before shortlisting properties.
- Ask the commercial lender or broker how the proposed loan will be assessed, what valuation basis applies, and what income-coverage ratio or documentation is required for the specific asset and borrower type.
- Calculate price contribution, purchase costs, GST timing, valuation-shortfall exposure, and reserve capital as separate line items, not a single deposit number.
- Obtain legal, tax, valuation, building, environmental, and SMSF advice where relevant to the transaction structure and asset.
- Make an offer only when the funding position and contract conditions are documented, including finance and due diligence conditions that protect the deposit if the valuation or due diligence does not proceed as expected.
The right question is not only, "What deposit percentage do I need?" It is, "Can I fund the purchase, absorb the transaction costs, and hold the asset if the valuation, lease, or cash flow is less favourable than expected?"
If you are working through that calculation now, map out your next property move with a buyer-side adviser before the numbers are locked in. For direct enquiries, contact the Buyers Agency Australia team to discuss your acquisition target, budget, and timeline.
