Self managed super fund loan

An SMSF loan is a Limited Recourse Borrowing Arrangement (LRBA) that allows a Self-Managed Super Fund to borrow money to purchase property. The loan is secured against the purchased property only (limited recourse), meaning the lender cannot claim other SMSF assets if the loan defaults. The property is held in a bare trust until the loan is fully repaid, then the title transfers to the SMSF.

LRBA stands for Limited Recourse Borrowing Arrangement. It is the only legal method for an SMSF to borrow money to acquire property under the Superannuation Industry (Supervision) Act. The "limited recourse" protection means that if the SMSF defaults, the lender's claim is restricted to the specific property purchased under that LRBA, protecting all other assets in the fund.

A bare trust (holding trust) is a separate legal structure required by the SIS Act to hold the property title while the LRBA is being repaid. The bare trust has its own corporate trustee (separate from the SMSF trustee). The SMSF is the beneficial owner and receives all rental income. Once the SMSF loan is repaid, the property title transfers from the bare trust to the SMSF. Each property requires its own separate bare trust. Your solicitor establishes the bare trust as part of the SMSF loan process.

Most SMSF lenders require a deposit of 20% to 30% for residential property and 30% to 40% for commercial property. The deposit must come from the SMSF's own funds (contributions, investment returns, rollovers). A larger deposit reduces the LVR, which may result in a better SMSF loan interest rate and may waive the personal guarantee requirement. Our mortgage broker team compares deposit requirements across all SMSF lenders on our panel.

Rental income taxed at the concessional rate of 15% (versus personal rates up to 45%). Loan interest, insurance, rates, maintenance, and property management fees all deductible. Capital gains tax discount for assets held over 12 months (effective rate approximately 10%). In the pension phase, rental income and capital gains can be completely tax-free. Consult your accountant for advice specific to your SMSF.

Yes. Your SMSF can purchase residential property through an LRBA. However, the residential property cannot be lived in or rented by fund members, trustees, or related parties. It must be a genuine investment rented to unrelated tenants at market rates. Breaching this rule can result in severe penalties from the ATO. Our mortgage broker team ensures the SMSF loan application meets all residential property requirements.

Yes. Commercial property (business real property) is one of the most popular SMSF property investments because it can be leased to a related party (such as your own business) at market rates. This means your business pays rent to your SMSF instead of to a landlord, building your retirement wealth. SMSF loan deposits for commercial property are typically 30% to 40%. Our mortgage broker team compares specialist commercial SMSF lenders.

A personal guarantee means you (as an SMSF member) are personally liable for the SMSF loan if the fund defaults. Most lenders require personal guarantees when the LVR exceeds 60% for residential or 50% for commercial property. While the LRBA protects other SMSF assets, a personal guarantee extends the lender's claim to your personal assets. Providing a larger deposit can reduce or eliminate this requirement.

Yes. SMSF loan rates are typically 0.5% to 2% higher than standard investment property loan rates because of the limited recourse nature, higher compliance requirements, and reduced lender competition. However, the concessional tax rate on rental income (15%) and the tax deductibility of SMSF loan interest often more than offset the higher rate. Our mortgage broker team compares SMSF rates across 35+ lenders to minimise the premium.

While the LRBA is in place, you can only perform repairs and maintenance on the property. You cannot make improvements that change the character of the asset (such as adding a second storey, subdividing, or major renovations). This restriction is a key LRBA compliance rule under the SIS Act. Once the SMSF loan is fully repaid and the property title has transferred to the SMSF, you can make improvements without this restriction.

Under the SIS Act, an LRBA can only be used to acquire a single acquirable asset. For property, this means one property on one title. You cannot buy vacant land and then build on it using LRBA funds (as this creates a new asset). You cannot combine multiple properties under one LRBA. Each property purchase requires its own separate LRBA and bare trust structure.

Yes. SMSF loan refinancing is permitted provided the new loan still complies with the original LRBA structure and SIS Act requirements. You cannot change the single acquirable asset or alter the fundamental borrowing arrangement. Refinancing can save you money if better SMSF loan rates have become available. Our mortgage broker team manages the SMSF refinancing process and ensures ongoing LRBA compliance.

When the LRBA is fully repaid, the property title can be transferred from the bare trust to the SMSF trustee. This transfer is generally exempt from stamp duty and capital gains tax (depending on state legislation). The bare trust company can then be deregistered. Once the property is held directly by the SMSF, the restriction on improvements no longer applies. Your solicitor handles the title transfer process.

There is no legislated minimum SMSF balance for borrowing, but practically most lenders require sufficient funds for the deposit (20% to 40%), stamp duty, legal fees, bare trust setup costs, and a cash buffer for ongoing expenses. As a general guide, an SMSF balance of $200,000 or more provides a realistic starting point for SMSF property investment. Our mortgage broker team assesses your specific fund balance against lender requirements.

No. Fund members, trustees, and related parties cannot live in or use a residential SMSF property. It must be rented to unrelated tenants. This is a strict ATO rule. Breaching it can result in the SMSF becoming non-compliant, with penalties including tax at 45% on all fund income. Commercial property (business real property) can be leased to a related party business at market rates.

When your SMSF enters the pension phase (retirement), the income and capital gains from assets supporting pension payments become tax-free. This means rental income from your SMSF property is no longer taxed at 15%, it is completely tax-free. Capital gains on the property when sold are also tax-free. This makes holding property in your SMSF through to retirement an extremely tax-efficient strategy.

SMSF loan repayments are funded from within the SMSF using member contributions (employer and voluntary), rental income from the property, and investment returns from other SMSF assets. The SMSF must have sufficient cash flow to meet loan repayments, property expenses, and compliance costs (audit, accounting). Our mortgage broker team ensures the SMSF loan repayments are sustainable based on projected contributions and rental income.

Yes. An SMSF loan requires an accountant (for SMSF compliance, tax advice, investment strategy confirmation), a solicitor (for bare trust establishment, contract review, title transfer), and an SMSF auditor (annual compliance audit). Our mortgage broker team does not provide tax or legal advice but coordinates closely with your professional advisors to ensure the lending component is properly integrated.

Yes. Your SMSF can own multiple properties through separate LRBAs, each with its own bare trust. The SMSF must have sufficient balance and cash flow to service all loans, cover all property expenses, and meet compliance costs. Each additional property requires a separate SMSF loan application. Our mortgage broker team helps you plan a multi-property SMSF strategy and identifies lenders that support portfolio growth.

SMSF loan approvals typically take 7 to 21 business days, longer than standard home loans due to additional compliance requirements (bare trust verification, SMSF deed review, accountant confirmation). Having your SMSF documents organised early (trust deed, financial statements, accountant and solicitor details) significantly speeds up the process. Our mortgage broker team prepares the application thoroughly to minimise delays.

Typical SMSF loan documents include: personal identification for all members, SMSF trust deed, latest SMSF financial statements, member statements showing balances, corporate trustee ABN and ASIC registration, bare trust deed (prepared by your solicitor), investment strategy, accountant and solicitor contact details, property contract of sale, and personal tax returns (for guarantee assessment). Our mortgage broker team provides a complete checklist.

Key risks include: higher SMSF loan rates reducing net returns, property vacancy reducing cash flow, inability to make improvements while the LRBA is in place, concentration risk (too much of the SMSF in one asset), liquidity risk (property is illiquid compared to shares), personal guarantee exposure, and compliance penalties if ATO rules are breached. SMSF property investment is not suitable for every fund. Consult your financial advisor.

Yes. Self-employed individuals commonly use SMSFs to purchase commercial property that they then lease to their own business. This is one of the most tax-efficient structures available for business owners. The business pays rent to the SMSF at market rates (a deductible expense), and the SMSF receives rental income taxed at only 15%. Our mortgage broker team has extensive experience with self-employed SMSF loans.

Yes. Many banks do not offer SMSF loans, and those that do have strict and varying requirements. A mortgage broker compares SMSF loan options across 35+ lenders (including specialist SMSF lenders), navigates LRBA compliance requirements, coordinates with your accountant and solicitor, and manages the entire application. The service costs $0. Going directly to a bank limits you to one set of products and terms.