SMSF loans
SMSF Loans: Property Finance Inside a Self-Managed Super Fund
Your adviser decides whether the strategy fits. We handle the part where a lender has to say yes.
Buying residential or commercial property inside a self-managed super fund is a structure a lot of Australians use, and the lending side of it is genuinely specialised work. Fewer lenders offer it than used to, the documentation requirements are stricter, and a structure that is set up in the wrong order can be expensive to unwind.
SMSF borrowing sits under the Superannuation Industry (Supervision) Act 1993. Loans have to be written as a limited recourse borrowing arrangement, or LRBA, which is what keeps the rest of the fund's assets out of reach if the loan ever goes bad. Because the major banks have largely stepped away from this market, competitive finance now comes from specialised non-bank lenders, and knowing which ones are still genuinely active matters.
I bring more than 20 years of financial services experience to your side of the table, including 14 years in executive roles inside a major Australian bank. We work alongside your accountant, financial adviser and solicitor so the loan is compliant, competitively priced, and does not hold up your settlement.
Prowest Financial Solutions is a credit representative. We are not a licensed financial adviser or a registered tax agent, and nothing on this page is a recommendation to open a self-managed super fund or to buy property through one. Whether an SMSF suits your circumstances, and what it means for your tax position, are questions for your licensed financial adviser and your accountant. Once you and they have settled the strategy, arranging the finance is our part of it.
How an LRBA and bare trust structure works
To borrow inside an SMSF, the loan has to be written as a limited recourse borrowing arrangement. Under an LRBA, the property title is held on trust by a separate legal entity, usually called a bare trust or security trust, until the loan is repaid in full.
The limited recourse part is the important bit. If the fund defaults, the lender's recourse is restricted to the property itself. They cannot reach the cash, shares or other investments sitting inside the fund.
The moving parts of an SMSF property purchase
- The SMSF trustee: Runs the fund and makes the investment decisions, with advice from your licensed adviser.
- The bare trust and its corporate trustee: Holds legal title to the property on the fund's behalf for the life of the loan.
- The limited recourse loan: The mortgage contract, signed by the SMSF trustee with a lender accredited for SMSF lending.
- The sole purpose test: The property must be held to provide retirement benefits to fund members, and nothing else.
Already have the strategy signed off by your adviser? Then the question is what the fund can borrow.
Assess your borrowing capacityCompare
Residential and commercial property inside an SMSF
The lending requirements below are what SMSF lenders typically apply. They vary between lenders and change over time, so treat them as a guide rather than a guarantee of what you will be offered.
| Feature | Residential property | Commercial business real property |
|---|---|---|
| Typical maximum loan to value ratio | Usually 70% to 80% | Usually 70% to 80% |
| Who can occupy it | Fund members and related parties cannot live in it or rent it | Fund members can lease it to their own trading business at market rates |
| Why trustees typically use it | Long-term capital growth and rental demand | Business owners occupy their own premises while the rent goes to their fund |
| Liquidity lenders expect | Commonly 5% to 10% held in cash or liquid assets after settlement | More variable, depending on tenant quality and the strength of the business |
Who handles what
SMSF property purchases involve several professionals, and the most common cause of delay is a gap between them. Here is where the line sits, so nothing falls through it.
| Your adviser, accountant and solicitor | Prowest |
|---|---|
| Whether an SMSF suits you, and setting the fund up | Working out what the fund can realistically borrow |
| The fund's investment strategy, and whether property belongs in it | Identifying which lenders are still active in SMSF lending and which fit your fund |
| Tax treatment, contribution caps and pension phase | Structuring the LRBA so it satisfies both lender policy and the SIS Act |
| Drafting the bare trust deed and the legal documentation | Checking the structure before contracts are signed, then running valuation through to settlement |
The order matters more here than in ordinary lending. A bare trust executed after the contract is signed, or in the wrong entity's name, can invalidate the arrangement and trigger stamp duty a second time. We check that structure before anything is signed, which is the single most useful thing a broker can do on an SMSF purchase.
Bring your adviser into the same conversation and we will work through it together.
Review your SMSF loan optionsHow it works
Our SMSF lending process
We run the credit application end to end and keep your accountant, adviser and solicitor moving in step with the lender.
01
Capacity and liquidity check
We work out what the fund can borrow using member contributions, expected rental income, and the cash buffer lenders will want to see after settlement.
02
Lender matching
We compare the lenders still writing SMSF loans on pricing, terms and policy, and tell you which ones your fund actually fits.
03
Structure check before you sign
We review the fund deed and the bare trust arrangement against lender requirements before contracts are executed, when problems are still cheap to fix.
04
Valuation and settlement
We coordinate the valuation, the legal documentation and settlement itself so the timeline holds.
Questions
Frequently asked questions about SMSF loans
Can the fund renovate a property bought with an SMSF loan?
Repairs and maintenance to keep the asset in good order are generally fine, funded from the fund's own money. What is not permitted while an LRBA is in place is a major improvement that changes the character of the asset, because the arrangement has to relate to a single acquirable asset. Where the line sits in your case is a question for your accountant or adviser, and it is worth asking before you commit to works.
How much does the fund need before lenders will consider it?
There is no statutory minimum. In practice, most SMSF lenders want to see a fund balance in the range of $150,000 to $200,000 or more once you account for the deposit, setup costs and the cash buffer they require after settlement. That is a lending requirement rather than a rule, and it differs between lenders.
Can I use my personal income to help the fund service the loan?
Not directly. The loan is serviced by the fund. What does count toward serviceability is employer superannuation guarantee contributions, voluntary concessional and non-concessional contributions, and the fund's existing income including rent from the property. Contribution caps apply, and your accountant is the right person to confirm what you can put in.
Can a business lease commercial premises back from its owner's SMSF?
Yes, where the property qualifies as business real property. It can be leased to a fund member's own operating business, provided the lease is properly documented and the rent is set and paid at genuine market rates on arm's length terms. This is one of the more common reasons business owners look at SMSF lending in the first place.
Where to from here
Ready to look at SMSF property finance?
Whether the fund is looking at a residential investment or you want to buy the premises your business operates from, the question we can answer is a concrete one: what will a lender actually advance, and on what terms.
Bring your adviser or accountant along if that is easier. No obligation, and no credit check just to work through it.
Level 28, 140 St Georges Terrace, Perth WA 6000
Get directions
Monday to Friday, 9am to 5pm
Where to from here
Start with a straight answer.
One short conversation is usually all it takes to know where you stand and what your options actually are. Nothing to fill in first, no obligation at the end of it, and if the answer is no, I will tell you that and what would need to change.
Monday to Friday, 9am to 5pm. Perth CBD, or by phone and video anywhere in Australia.