SMSF Property Loans
SMSF property investment is complex—but with Clarity on the rules, Comfort in compliance, and Confidence in strategy, it can be a powerful wealth-building tool.
We guide you through limited recourse borrowing arrangements (LRBAs) and connect you with specialist lenders.
Important: Professional Advice Required
SMSF lending is complex and regulated. We strongly recommend getting advice from your accountant, financial planner, and SMSF specialist solicitor before proceeding. We help with the lending component only and work alongside your advisory team.
Benefits of SMSF Property Investment
Investing in property through your SMSF can offer significant tax advantages and help build wealth for retirement. We help you understand the lending side of this strategy.
Tax Advantages
Rental income taxed at 15% (or 0% in pension phase). Capital gains taxed at 10% after 12 months.
Wealth Building
Use your super to build a property portfolio while working, with rental income compounding within your fund.
Asset Protection
SMSF assets are generally protected from bankruptcy and creditors, subject to certain conditions.
Retirement Security
Own property assets that can provide income or be sold to fund your retirement lifestyle.
How SMSF Borrowing Works
SMSF property lending uses a Limited Recourse Borrowing Arrangement (LRBA)
SMSF Identifies Property
Your SMSF trustee identifies a suitable property that meets the sole purpose test.
Bare Trust Established
A separate bare trust (holding trust) is established to hold the property until the loan is repaid.
LRBA Loan Obtained
We arrange the loan with a specialist SMSF lender. The loan is "limited recourse" - the lender can only claim the property if default occurs.
Property Acquired
The bare trust acquires the property. Rental income goes to the SMSF, loan repayments come from the SMSF.
Loan Repaid, Title Transfers
Once the loan is fully repaid, the property transfers from the bare trust to the SMSF directly.
Key Requirements
Bare Trust Structure
Property must be held in a bare trust (custodian trust) until the loan is repaid in full.
Single Acquirable Asset
Each LRBA can only fund one asset. Separate borrowing arrangements for multiple properties.
Arm's Length Terms
All dealings must be on commercial terms. No sweetheart deals with related parties.
Eligibility Checklist
- SMSF established and compliant
- Adequate fund balance (typically $200k+)
- Investment strategy allows property
- Property meets sole purpose test
- Commercial terms (arm's length)
- Residential or commercial property
Typical Loan Terms
Maximum LVR
70-80%
Loan Term
Up to 25 years
Minimum Fund Balance
~$200,000
* Terms vary by lender. Higher fund balances provide more options.
Important Considerations
No Improvements During Loan
While the property is held in the bare trust (during the loan), you cannot make significant improvements that change the character of the property. Minor repairs and maintenance are permitted.
Cash Flow Requirements
Your SMSF must have sufficient cash flow to service the loan, pay expenses, and maintain liquidity. Lenders will assess the fund's ongoing viability.
Higher Interest Rates
SMSF loans typically attract higher interest rates than standard investment loans (usually 0.5-1% higher) due to the additional complexity and risk for lenders.
Related Party Rules
You cannot acquire property from a related party (with some exceptions for business real property). Fund members cannot live in or rent the residential property.
SMSF Loan FAQs
Can I buy a property I want to live in?
No. The sole purpose test prohibits fund members from living in or using residential property owned by their SMSF. It must be held purely for retirement benefits.
What about commercial property?
Yes, SMSFs can purchase commercial property. Interestingly, business real property can be leased to a related party (like your own business) at market rates.
How much deposit does my SMSF need?
Most SMSF lenders require 20-30% deposit, plus additional funds for stamp duty, legal fees, and a cash buffer. We recommend having at least $200,000 in your fund.
Can I use a personal guarantee?
Yes, most SMSF lenders require personal guarantees from fund members. This means your personal assets could be at risk if the loan defaults.
Considering SMSF Property Investment?
Book a consultation to discuss your SMSF lending options. We'll work with your accountant and advisors to structure the right solution.
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