SMSF loans

Can an SMSF borrow to buy property?

A Self-Managed Super Fund can borrow money to purchase property through a structure known as a Limited Recourse Borrowing Arrangement (LRBA). This framework, permitted under the Superannuation Industry (Supervision) Act 1993, allows your SMSF to take out a loan to acquire a single acquirable asset, in this case, a residential or commercial property, which is held in a separate bare trust until the loan is repaid.

What limited recourse means

The "limited recourse" aspect means that if the SMSF defaults on the loan, the lender's recovery is limited to the property itself. They cannot access other assets within the SMSF, which protects the fund's diversified retirement savings. This protection comes at a cost, SMSF loan interest rates are higher than personal property loans, and deposit requirements are larger.

The tax position

The tax benefits of purchasing property through an SMSF can be substantial. Rental income received by the fund is taxed at just 15% during the accumulation phase (compared to your marginal personal tax rate, which could be up to 47%). If the fund is in pension phase, the rental income may be completely tax-free. Capital gains on the sale of the property receive a one-third discount if held for more than 12 months during the accumulation phase, and are tax-free during pension phase.

What are the LRBA rules from the ATO?

The ATO publishes the conditions a limited recourse borrowing arrangement must meet under sections 67A and 67B of the Superannuation Industry (Supervision) Act. In plain terms:

• Single acquirable asset. The borrowed money is used to buy one asset, or a collection of identical assets with the same market value, that the fund is otherwise allowed to buy. One house on one title qualifies; a house and a separately titled granny flat, or a parcel of adjoining lots, generally do not.
• Holding trust. The asset is held on trust (the bare trust) so the fund receives a beneficial interest, with the right to acquire legal ownership once the loan is repaid.
• Limited recourse. The lender's rights on default are limited to the asset; other fund assets cannot be taken. Lenders price for that, and most require personal guarantees from the members, which the ATO permits.
• No improvements from borrowed money. Borrowed funds can maintain or repair the asset but not improve it, and the asset cannot be replaced by a different asset while the arrangement runs, so a knock-down rebuild or a subdivision is out until the loan is cleared.
• Refinancing is allowed. The ATO permits a new LRBA over the same asset to refinance the old one, which is how the refinance products in the table below work.

The general SMSF rules that also apply

Alongside the borrowing rules sit the general SMSF rules: the sole purpose test, the in-house asset limit of 5% of fund assets, the arm's length rule on every dealing with related parties, and the requirement that the investment fit the fund's written investment strategy, including its liquidity to meet loan repayments.

The ATO also publishes the timing rules that matter around a purchase: a fund that breaches them can be made non-complying and taxed at the top marginal rate on its assets, so the structure is set up by a solicitor before contracts are signed, not after.

Which lenders offer SMSF loans, and on what terms?

This is a specialist market. The lenders that publish SMSF terms are non-bank and mutual lenders plus BOQ and AMP; the big four do not advertise an SMSF loan product. Checked against each lender's published product page on 19 and 20 September 2026. Terms change without notice; confirm the current position with the lender or your broker before relying on it. Where a lender does not publish a figure the cell says so.

Can I use my super to buy an investment property?

Not personally, and not from an industry or retail fund. The only way to buy an investment property with super is inside an SMSF, because an SMSF trustee can hold direct property and borrow under an LRBA; a public fund cannot lend you your balance and you cannot withdraw it before a condition of release. The property then belongs to the fund, not to you: the rent goes to the fund, the fund pays the loan, and you cannot live in it, holiday in it or rent it to family, because a residential lease to a related party is an in-house asset and the 5% limit would be breached at once.

The business premises exception

The exception is business real property: the fund can buy the premises your business trades from and lease them to the business at market rent, which is the most common SMSF property purchase and is covered in the commercial property loans guide.

The trade-off: tax against flexibility

The trade-off is between the tax rate and the loss of flexibility. AMP publishes that rental income in the fund is taxed at 15% during accumulation and 0% once the fund is paying a retirement-phase pension, against your marginal rate outside super, and capital gains on assets held over 12 months get a one-third discount in accumulation. Against that, the fund cannot negatively gear against your salary, the loan runs at the SMSF rates above rather than a standard investment rate, and the property is locked away until you meet a condition of release. A licensed financial adviser, not a broker, is the person to test whether that fits your retirement plan; the broker's job starts once the fund has decided to buy.

How much can my SMSF borrow?

Two limits apply, and the lower one wins.

The LVR ceiling

The LVR ceiling is 80% at most lenders that publish terms and 90% at Liberty on residential, with commercial property at 70% to 80%.

The serviceability test

The serviceability test asks whether the fund can meet the repayments from rent plus member contributions; La Trobe publishes that it counts 80% of rental income and deems the fund's other income at 3.9%, and Liberty publishes no minimum contribution requirement.

A worked example

Worked through at 80% LVR: a fund with $200,000 in cash can cover a 20% deposit plus roughly 5% for stamp duty and costs on a purchase of about $750,000, leaving little liquidity buffer, which is why most brokers suggest holding back a year of repayments and expenses. The loan of about $600,000 costs about $4,113 a month at 7.3% p.a. over 30 years. The repayment calculator shows the repayments at the published SMSF rates so you can test them against the rent.

What is a bare trust, and why is it required?

Every SMSF property purchase under an LRBA must involve a bare trust. This is not optional, it is a legal requirement. The bare trust is a simple trust structure where a separate trustee (usually a special-purpose company) holds legal title to the property on behalf of the SMSF. The SMSF is the beneficial owner and receives all the economic benefits of ownership (rent, capital growth), while the bare trustee holds legal title as a custodian.

The bare trust exists because the Superannuation Industry Act requires that the property being acquired cannot be held directly by the SMSF trustee while a borrowing is in place. Once the LRBA loan is fully repaid, the property is transferred from the bare trust to the SMSF trustee, and the bare trust is wound up.

Setting up the bare trust

Setting up a bare trust involves establishing a bare trust deed, appointing a corporate trustee for the bare trust (a $300-$500 shelf company is typically used), and registering the property in the name of the bare trust trustee. Your solicitor and accountant will coordinate this as part of the purchase process. The total cost of establishing the bare trust structure is typically $1,500-$3,000.

What rules must the fund follow?

SMSF property investment is governed by strict compliance rules. Breaching these rules can result in the fund being classified as non-compliant, triggering significant tax penalties. Understanding and adhering to these rules is essential.

The sole purpose test: The property must be acquired and held solely for the purpose of providing retirement benefits to fund members. You cannot buy a property because you want to live in it later (while still working) or because it suits a family member.

No personal use: Fund members, their relatives, and associated entities cannot live in, holiday in, or otherwise personally use residential property owned by the SMSF. This includes short-term stays. Commercial property has an exception, a member's business can lease commercial premises from the SMSF at arm's-length market rent.

Single acquirable asset: Each LRBA can only be used to acquire a single property. If you want to buy multiple properties, you need separate LRBAs for each. The property cannot be a mixed-use asset.

No improvements during the LRBA: While the loan is outstanding, the SMSF cannot use borrowed money to improve the property, and cannot change it into a different asset. Routine maintenance and repairs are permitted, and the ATO allows improvements paid from the fund's own cash as long as the asset stays the same asset, but extensions, subdivisions or rebuilds wait until the loan is repaid.

The 5% in-house asset limit: Loans to, investments in and leases to related parties cannot exceed 5% of the fund's assets at market value. A residential property leased to a member or relative is an in-house asset, which is the legal reason behind the no-personal-use rule. Business real property leased to a related business at market rent is exempt.

Is SMSF property right for your fund?

SMSF property investment is not suitable for everyone. It works best when you have a substantial SMSF balance (ideally $250,000+ after the purchase to maintain diversification), a clear investment strategy aligned with your retirement timeline, the ability to cover loan repayments, expenses, and vacancies from the fund's cash flow, and access to quality professional advice (accountant, financial adviser, and solicitor experienced in SMSF).

The running costs

The setup and ongoing compliance costs of SMSF property ownership are significant. Beyond the loan and purchase costs, you will need to pay for an SMSF audit each year, ongoing accounting and tax return preparation, bare trust administration, property management, and insurance. These costs must be justified by the investment return and tax advantages.

When the risks outweigh the benefits

If your SMSF balance is smaller or you are approaching retirement age, the risks may outweigh the benefits. Concentrating too much of your retirement savings in a single illiquid asset creates vulnerability to property market downturns, vacancies, and unexpected maintenance costs. Discuss your overall retirement strategy with a licensed financial adviser before proceeding with SMSF property.