A self-managed superannuation fund may be permitted to borrow in limited circumstances using a limited recourse borrowing arrangement, commonly referred to as an LRBA.
SMSF borrowing is legally and financially complex. The structure must generally be established correctly before the property contract and loan documents are completed. Errors can result in significant costs, compliance concerns or an inability to proceed with the chosen lender.
A finance broker can assist with the lending component but cannot replace independent legal, taxation, superannuation or financial advice.
What is an LRBA?
Under an LRBA, the SMSF trustee borrows to purchase an eligible asset. The asset is held by a separate holding trust while the fund holds the beneficial interest. Once the loan has been repaid, the SMSF can generally obtain legal ownership.
The lender's recourse is generally limited to the asset acquired under the arrangement, although lenders may also require personal guarantees from fund members or directors.
Important change from 10 August 2026
For new arrangements entered into on or after 10 August 2026, legislative changes restrict the real property that may be acquired under an LRBA. New arrangements will generally be limited to real property that meets the definition of business real property.
The change does not apply in the same way to arrangements that existed before 10 August 2026 and does not prevent the refinancing of eligible pre-existing arrangements.
This page must be reviewed by finweb's compliance or legal adviser immediately before publication. A general statement that an SMSF can borrow to purchase residential property will become materially inaccurate for many new transactions from 10 August 2026.
SMSF loan applications
Lenders may assess:
Lender criteria can be more restrictive than the minimum requirements under superannuation law.
- The SMSF trust deed
- The fund's investment strategy
- The holding trust and trustee structure
- Member contributions
- Fund income, expenses and liquidity
- Existing fund assets and liabilities
- The proposed property and lease arrangements
- The deposit and transaction costs
- Members' financial positions
- Personal guarantees, where required
- Advice and documentation obtained before the transaction
Business real property
Broadly, business real property is property used wholly and exclusively in one or more businesses, subject to applicable superannuation rules and limited exceptions.
Whether a particular property qualifies is a legal and taxation question. This should be confirmed before the SMSF enters a contract, establishes the borrowing arrangement or commits funds.
Repairs, improvements and development
SMSF borrowing rules can restrict how borrowed money is used and what changes may be made to an asset while the loan remains in place.
The distinction between repairing an asset and improving or replacing it can be important. Development, construction, subdivision and major renovation proposals require specialist advice before any commitment is made.
Key SMSF borrowing risks
Potential risks include:
SMSF trustees remain responsible for the fund's decisions and compliance obligations.
- Higher interest rates and fees
- Larger deposit requirements
- Reduced lender availability
- Legal and trust establishment costs
- Cash-flow pressure within the fund
- Vacancy and property expenses
- Concentration of retirement savings
- Personal guarantees
- Incorrect sequencing or documentation
- Breaches of superannuation or taxation requirements
Coordinate your SMSF finance carefully
Before proceeding, trustees should obtain advice from appropriately qualified legal, taxation and financial professionals. Once the proposed structure and property are confirmed, an experienced broker can assess potential lender options and manage the finance application.
Discuss an SMSF property loan
Speak with an experienced broker about your circumstances, available options and the next steps.
FAQs
Can an SMSF still borrow to purchase residential property?
The rules changed on 10 August 2026. New LRBAs entered from that date will generally not be able to acquire real property unless it qualifies as business real property. Existing arrangements and eligible refinances may be treated differently. Specialist advice should be obtained.
Can I live in a property owned by my SMSF?
Generally, residential property held by an SMSF cannot be used by a member or related party. Advice should be obtained about the particular property and proposed use.
Can my business lease property from my SMSF?
This may be possible where the property qualifies as business real property and all applicable rules are satisfied. Independent advice is required.
Can borrowed money fund renovations?
There are restrictions on the use of borrowed funds and changes to an asset under an LRBA. Legal and taxation advice should be obtained before undertaking repairs, improvements or development.