Guide
Sale and Leaseback of Your Premises
Selling the building and staying put releases more capital than any loan against it. It also hands the asset, and a long rent commitment, to someone else. This page is the honest version of that trade, and how to run it properly.
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Quick facts: sale and leaseback (checked 14 August 2026)
| What a sale releases | Full market value, less costs and tax |
| What borrowing releases instead | Published ceilings of 75-80% LVR (La Trobe 75%; Pepper 80% to $5m; Liberty 80% on lease income) |
| How the price is set | Annual rent divided by the market yield |
| Perth prime yields | 6.5% industrial, 7.6% CBD office (Knight Frank, Q1 2026) |
| Price effect of rent | At a 6.5% yield, $10,000 of annual rent adds ~$154,000 of price |
| GST and CGT | Structure-dependent; agree the treatment before signing |
A sale and leaseback means selling the premises your business owns, and leasing them back from the buyer at settlement so the business never moves. It releases the full value of the property as capital, where borrowing against the same building releases at most the published 75 to 80% LVR ceilings. The price an investor pays is set by the rent you agree to carry, capitalised at a market yield, which makes the lease you sign the real subject of the negotiation.
Sell the building, or borrow against it?
If the goal is capital for the business, the premises can produce it two ways: an equity release or refinance against the property, or a sale with a leaseback. Most owners price only one of them. The loan keeps the asset and its growth on your balance sheet but releases the smaller amount, capped by the lending ceilings and the serviceability test. The sale releases everything the market will pay, but the asset and its future value belong to the buyer, and the rent you agree to pay them is a commitment that runs for the life of the lease, usually with escalations built in.
The comparison worth writing down is what the released capital earns inside the business against what the property would have earned by being kept. A business that can turn capital into profit faster than Perth commercial property appreciates has a genuine case to sell. A business that cannot is selling its best asset to fund its weakest activity, and there are years when that is exactly what a distressed balance sheet needs, but it should be chosen with open eyes rather than discovered afterwards.
If the borrowing route is the better fit, our commercial property finance page covers how an equity release is assessed, and the commercial property loan calculator puts numbers on what a refinance releases and costs.
The rent sets the price, and you pay both sides of that
Investors price a tenanted commercial property by capitalising the rent: annual rent divided by the yield they require for that asset class. Knight Frank's Q1 2026 reads put Perth prime yields at 6.5% for industrial and 7.6% for CBD office (Knight Frank Research, Perth Industrial and Perth CBD Office State of the Market, Q1 2026, checked 14 August 2026). At a 6.5% yield, every $10,000 of annual rent adds roughly $154,000 to the price. At 7.6%, about $132,000.
Agreeing to a higher rent inflates your sale price on settlement day, and then you pay that rent, escalated annually, for 10 or 15 years. A leaseback priced for the vendor's best settlement outcome is routinely a leaseback the business regrets by year five. The discipline is to set the rent at what the business can genuinely carry through a soft year, and let the price follow.
The lease is the product
What the buyer is really purchasing is your lease: its length, its escalations, the strength of your covenant, and who carries the outgoings. Longer terms, fixed uplifts and a net lease all lift the price, and every one of them is a heavier commitment from your side. The clauses that protect you are the unglamorous ones: options to renew, rights to assign if the business is sold, make-good obligations that are defined rather than open-ended, and a market rent review mechanism that works in both directions.
Tax sits alongside all of it. GST is usually in play on a commercial sale, and whether the going concern exemption can apply to a leaseback depends on how the transaction is structured, so the treatment belongs in the contract, agreed before signing, not resolved after. The sale is also a CGT event, and the small business CGT concessions may be relevant depending on your circumstances. Both are conversations with your accountant that change the economics, which is why we model the tax position alongside the funding comparison rather than treating them as separate jobs.
Where we fit
We are a finance brokerage, and the reason owners bring us a sale and leaseback early is that the decision is a financing comparison before it is a property transaction. We model the borrow-against-it route against the sell-and-lease-back route on your numbers: what each releases, what each costs annually, and what each does to the balance sheet the next lender reads. If the sale proceeds, the use of the released capital often needs structuring of its own, whether that is retiring debt, funding acquisitions covered under acquisition finance, or working capital. And on the other side of these transactions, investors buying leaseback assets are exactly the buyers our guide to lease doc commercial loans is written for, because the lease that comes with the property can do the qualifying.
Frequently asked questions
What is a sale and leaseback of business premises?
A sale and leaseback is a transaction where you sell the premises your business owns and occupies, and lease them back from the buyer at settlement, usually on a long lease. The business stays exactly where it is and keeps trading. What changes is the balance sheet: the property becomes capital in the bank, and the ownership costs become rent. It suits owners who have more value tied up in the building than the business can afford to have idle, and it is common in succession planning, where the property is sold but the trading business continues or is passed on.
Sale and leaseback or borrowing against the premises: which releases more capital?
A sale releases the full market value of the property, less transaction costs and tax. Borrowing against the same building releases at most the published lending ceilings, which sit at 75 to 80% LVR (La Trobe Financial publishes 75%, Pepper Money up to 80% to $5 million, Liberty up to 80% on lease income, all checked 14 August 2026), and in practice often less on specialised assets. So the sale releases more cash. The trade is permanent: borrowing keeps the asset and its future growth on your balance sheet, a sale gives both to the buyer along with the rent. Which trade is right depends on what the capital earns inside the business against what the property would have earned by being kept.
How is the price set in a sale and leaseback?
By the rent you agree to pay, capitalised at a market yield. Investors price a tenanted commercial property by dividing the annual rent by the yield they require, and Knight Frank puts Perth prime yields at 6.5% for industrial and 7.6% for CBD office as at Q1 2026 (Knight Frank Research, State of the Market reports, checked 14 August 2026). At a 6.5% yield, every $10,000 of annual rent you agree to pay adds roughly $154,000 to the price. That mechanic cuts both ways: a higher rent lifts your sale price today, and you are the one paying that rent, with escalations, for the life of the lease. So the rent is where the negotiation actually happens.
Do I pay GST or capital gains tax on a sale and leaseback?
Both need advice before you sign anything. GST is usually in play on a commercial property sale, and whether the going concern exemption can apply to a sale and leaseback depends on how the transaction is structured and documented, so the treatment should be agreed in the contract and confirmed with your accountant first. The sale is also a disposal for capital gains tax purposes, and depending on your circumstances the small business CGT concessions may be relevant. The tax position can change the economics of the whole transaction, which is why we model it alongside the funding rather than leaving it to settle later.
What lease terms do buyers of a leaseback want?
A long initial term, fixed or CPI-linked rent escalations, a tenant covenant they can bank, and a net lease where the tenant carries the outgoings. Every one of those makes the property worth more to the buyer, and every one of them is a longer or heavier commitment from you. The lease you sign is the product being sold, so it deserves the same negotiation discipline as the price. Where you want flexibility, options to renew and rights to assign the lease matter more than headline rent, because they decide what happens if the business is sold or outgrows the site.
Does a sale and leaseback hurt my ability to borrow afterwards?
It changes the shape of the conversation rather than ending it. After the sale the business shows rent as an occupancy cost, which lenders assess like any other commitment, and the property is no longer available as security. Against that, the business holds more cash, less debt, or both, which strengthens the balance sheet a lender reads. The honest answer is that it depends on what the released capital is used for: paying down expensive debt or funding profitable work reads well, and capital that leaves the business reads badly. That use-of-funds story is worth writing down before the sale, because a future lender will ask for it.
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Prefer to talk? Call Rowan on 0483 292 005 or Ari on 0434 929 370.