Access to a larger asset
Can the fund buy more than its cash balance?
Borrowing lets a fund acquire a property it could not purchase outright, bringing forward exposure to an asset class it may otherwise have taken years to reach.
SMSF LENDING
Borrowing to buy property inside your super fund
How a limited recourse borrowing arrangement works, what lenders ask for, and where the traps sit.
IN SHORT
An SMSF loan lets a super fund borrow to buy an investment property
The formal name is a limited recourse borrowing arrangement, or LRBA. The fund borrows to acquire a single asset, which is held in a separate holding trust until the loan is repaid. Rent received goes to the fund, and the fund makes the repayments.
The 'limited recourse' part is the defining feature: if the loan defaults, the lender's claim is limited to that one property. Other assets of the fund are not available to the lender, which is exactly why these loans are priced higher and offered by fewer lenders than ordinary mortgages.
This is a structured, compliance-heavy area. It suits some funds well and is a poor fit for others, and the difference is worth establishing before you spend money on it.
WHY IT HELPS
Why funds consider it
Contained risk
What happens if it goes wrong?
The lender's recourse is limited to the single property held in the holding trust. The fund's other investments are not exposed to that debt.
Rent stays in the fund
Where does the income go?
Rental income is received by the fund and applied to the loan, with any surplus retained inside the fund's investment pool.
HOW IT WORKS
The structure, in order
An SMSF purchase involves more moving parts than a standard purchase, and they have to happen in the right sequence. Getting the order wrong can create compliance problems that are expensive or impossible to unwind.
- The fund must exist, be compliant, and have an investment strategy that permits the purchase
- A separate holding trust and trustee are established to hold the asset
- The lender assesses the fund's contributions, rent and liquidity — not your personal capacity alone
- The property is acquired by the holding trust, with the fund holding beneficial interest
- Title transfers to the fund once the loan has been repaid in full
IS IT RIGHT FOR YOU
Whether an SMSF loan makes sense
This tends to suit you if
- The fund has a solid balance — lenders and auditors both want to see liquidity beyond the deposit.
- Contributions are consistent — regular contributions support serviceability alongside rent.
- The property is straightforward — standard residential or commercial security is far easier to fund.
- You have professional support — an accountant and adviser already engaged with the fund.
Worth weighing up
- Costs are higher throughout — rates, establishment costs and ongoing administration all exceed a normal purchase.
- The fund must stay liquid — repayments, insurance, rates and repairs all have to be met from the fund.
- You cannot improve the property freely — repairs are permitted; changes to its character generally are not while the loan is on foot.
- Losses stay in the fund — tax losses cannot be offset against income you earn outside it.
Superannuation borrowing is governed by superannuation law as well as credit law, and the rules change from time to time. Confirm the current position with your accountant or SMSF adviser before acting.
How working with us actually goes
Step 1
We start with a conversation, not an application
Step 2
We work out what you can borrow and what it costs
Step 3
We prepare the application and deal with the lender
Step 4
We stay across the loan long after settlement
COMMON QUESTIONS
Questions we get asked about this
How much can an SMSF borrow?
Lenders generally require a larger deposit than for a personal purchase, and maximum loan-to-value ratios for SMSF lending are lower than for standard home loans, with commercial security usually more conservative again.
Capacity depends on the fund's balance, its contribution history and the property's rental income. We can give you a realistic figure once we know the fund's position.
Which lenders offer SMSF loans?
A smaller group than for ordinary mortgages. Some major banks have withdrawn from the segment at various times, and much of the market sits with specialist and non-bank lenders.
Policies differ significantly between them on minimum fund balance, acceptable property types and liquidity requirements.
Can the fund buy a property from me personally?
Generally not for residential property. Superannuation law restricts acquiring assets from related parties, with limited exceptions — business real property is the main one, and it must be acquired at market value.
This is a question for your accountant or SMSF adviser before anything else happens.
Can I live in a property my SMSF owns?
No. A residential property held by your fund cannot be lived in or rented by you, or by anyone related to you. It must be held genuinely for the retirement benefit of members.
Business real property is treated differently and can, in defined circumstances, be leased to a related business at market rates.
Can an existing SMSF loan be refinanced?
Often, yes, and it can be worth reviewing given how much SMSF pricing has moved over time.
The refinance must preserve the limited recourse structure and stay within the rules, so it needs to be arranged by someone who works in this area regularly.
RELATED
Where people usually go next
GET IN TOUCH
Want to know whether your fund can support a purchase?
Would rather talk it through?
(02) 9659 1694Important information
We provide credit assistance in relation to SMSF lending. We do not provide advice on establishing a self-managed super fund, on whether an SMSF is appropriate for you, or on superannuation strategy. Those are matters for a licensed financial adviser and your accountant.
The information on this page is general in nature. It has been prepared without taking your objectives, financial situation or needs into account, so it is not personal advice and you should consider whether it is appropriate for you before acting on it.
Any rates, figures or examples shown are indicative only. Lending is subject to approval, and lender eligibility criteria, terms, conditions, fees and charges apply. Talk to us about what your own circumstances allow.