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What is an SMSF loan?
Use your self-managed super fund to buy investment property.
An SMSF loan, or limited recourse borrowing arrangement (LRBA), lets your fund borrow to buy a residential or commercial investment property. Rent goes towards the loan, and any surplus stays in the fund.
Only a selection of lenders offer SMSF loans and rates are higher than standard home loans, because if the fund defaults the lender can only claim that one property — not the fund's other money or rental income. Once the loan is repaid, legal title passes to the SMSF, which can keep collecting rent or sell.
Here's how an SMSF loan works.
How it works
Limited recourse loan
The SMSF trustee borrows to buy a single acquirable asset, such as one property.
Holding trust
The property sits in a separate holding (bare) trust until the loan is repaid.
How much you can borrow
Depends on your fund's balance and contributions. Specialist lenders may go up to about 90% for residential and 80% for commercial; major banks are usually lower.
Fund income
Lenders assess employer contributions, voluntary contributions, rent, and dividend and interest income.
Lending restrictions
- Construction loans are not available
- You can't live in a residential property your SMSF owns (your business can occupy commercial premises at market rent)
- You or a related party can't sell a residential property to your SMSF (commercial property is allowed)
- Repairs and maintenance are fine, but no renovations that change the property's character until the loan is repaid
- The investment must meet the sole purpose test — providing retirement benefits
Advantages of SMSF property investment
- Potential tax savings — fund earnings are generally taxed at up to 15%, and pension-phase earnings can be tax-free.
- Asset protection — assets in super are generally protected from creditors.
- Opportunity — combine super balances to buy property you couldn't otherwise afford.
- Diversification beyond shares and cash, with potential rental yield and growth.
Risks to weigh up
| Risk | What it means |
|---|---|
| Higher costs | SMSF loans usually cost more than standard property loans, plus setup, audit and accounting fees. |
| Cash flow | The fund must cover repayments, insurance, rates and other costs from its own bank account. |
| No alterations | Renovations that change the property's character aren't allowed until the loan is repaid. |
| Tax losses stay in the fund | Property losses can't be offset against your personal income outside the fund. |
Ways to contribute to your SMSF
Caps shown are for 2025–26 and are indexed — confirm the current year's caps with your accountant.
| Type | How it works |
|---|---|
| Concessional | Taxed at 15% in the fund; you can claim a deduction up to $30,000 a year. If your total super balance is under $500,000 you may carry forward unused caps from the past five years. |
| Non-concessional | After-tax contributions with no deduction, capped at $120,000 a year (more with the bring-forward rule) if your total super balance is under $2 million. |
| Downsizer | Aged 55+? Contribute up to $300,000 each from selling your home; it doesn't count towards the non-concessional cap. |
- We arrange the loan; whether an SMSF or property purchase suits you is a question for a licensed financial adviser.
- Loans from related parties must be on arm's-length terms with a written agreement.
Do you want to discuss your options?
Frequently asked questions
How do I apply for an SMSF loan?
- • Set up your SMSF with a registered SMSF provider or accountant.
- • Get pre-approval from a lender that specialises in SMSF loans.
- • Find a property that meets the SMSF rules, and set up the holding trust before you sign.
Can I refinance an SMSF loan?
- Usually yes, as long as the loan isn't in arrears and repayments have been met for the last 12 months.
How is borrowing power assessed?
- On the fund's current income from its latest tax return and management accounts, plus the expected rent from the new property. The fund must have enough income to support the loan.
Why don't many banks lend to super funds?
- The market is small, trust lending is complex, and the lender's recourse is limited to the property itself.
General information only, based on ATO and Moneysmart guidance and lender policy as at 31 Oct 2026. This is not financial or tax advice — speak to a licensed adviser before setting up an SMSF property purchase.
