Borrowing inside a self-managed super fund (SMSF) to buy property is possible — but it’s specialist territory with strict ATO rules. If you’re considering this strategy, it’s essential to get it right.
What is an SMSF loan?
An SMSF loan allows your self-managed super fund to borrow money to buy an investment property. The loan is structured as a limited recourse borrowing arrangement (LRBA) — which means the lender’s claim is limited to the property purchased, not your other SMSF assets.
The property is held in a separate bare trust with a corporate trustee, and your SMSF makes the loan repayments from fund income (rent, contributions, and investment earnings).
Strict ATO rules
The ATO has specific rules about SMSF borrowing:
- The loan must be for a single acquirable asset (one property)
- The property must be held in a separate trust with a trustee distinct from the SMSF trustee
- The fund cannot improve the property beyond its original condition (though repairs and maintenance are allowed)
- The loan must be a limited recourse arrangement — the lender can’t go after other fund assets
- Contributions and fund cash flow must be sufficient to service the loan
Getting this wrong can trigger significant tax penalties. That’s why SMSF lending requires specialist advice at every step.
Who needs to be involved
- Your accountant — to assess whether an SMSF borrowing strategy makes sense for your overall financial position and tax situation
- Your financial adviser — to confirm the strategy aligns with your retirement goals and SMSF investment strategy
- A specialist lender — SMSF loans are offered by a smaller number of lenders with specific expertise
- A mortgage broker (James) — to find the right lender, structure the loan correctly, and manage the application
How we help
We work alongside your accountant and financial adviser to structure the SMSF loan correctly. We have access to specialist lenders who understand LRBA requirements, and we manage the application process from start to finish.
SMSF lending requires specialist advice. Talk to James and your accountant or financial adviser before proceeding.
Book a free chat with James to discuss whether an SMSF loan might be appropriate for you.
General information only. Talk to James for advice tailored to your situation.