SMSF
SMSF property lending, explained
Lending to a self-managed super fund is assessed differently to a personal loan - the fund is the borrower, the property is held on a holding trust, and the lender's recourse stops at that asset. Here's how it works, and what changed in August 2026.
A self-managed super fund can borrow to acquire business real property - commercial, industrial or other property used wholly and exclusively in a business - under a limited recourse borrowing arrangement (LRBA). The fund itself, not the members personally, is the borrower. That structure changes what a lender assesses and how the loan is repaid.
The rules that shape every SMSF loan
Superannuation funds are generally prohibited from borrowing. Section 67A of the Superannuation Industry (Supervision) Act 1993 is the exception that makes property lending possible, and it comes with conditions that a lender will check before anything else.
| Requirement | What it means in practice |
|---|---|
| Single acquirable asset | The loan buys one asset - usually one title - not a collection of unrelated properties |
| Holding trust | A separate trustee holds legal title on trust for the fund until the loan is repaid |
| Limited recourse | If the loan fails, the lender's rights against the fund are limited to that asset |
| No improvements | Borrowed money can pay for the purchase, acquisition costs and repairs, but not to improve the asset |
| Business real property only | An LRBA entered into on or after 10 August 2026 to buy real property can only acquire business real property |
What changed on 10 August 2026
From 10 August 2026, an LRBA used to buy real property can only be used to acquire business real property. Residential investment property is out for new arrangements. The ATO's guidance is that the change doesn't affect an LRBA entered into before that date, including where it is later refinanced for the same asset, or a binding contract exchanged before that date. It applies whoever the lender is - bank, non-bank or related party.
What's different about lending to an SMSF
- The fund is the legal borrower, and the members' personal income is not what the loan is written against
- The property is bought and held by a separate trustee on a holding trust, not by the fund directly
- The arrangement must be compliant, and the fund's deed has to permit the borrowing in the first place
- The lender's recourse against the fund is limited to the acquired asset, so other fund assets are protected if the arrangement fails
- Lenders may still ask members for personal guarantees, which sit outside the fund - read them carefully
How Alphacon assesses an SMSF deal
Alphacon lends from $200,000 to $5,000,000 against business real property held inside an SMSF, up to 70% LVR, over 6 to 60 months, from 9.95% p.a. There is no servicing test. The assessment sits on the property, the LVR and how the facility is repaid at the end of the term - a refinance to a long-term SMSF lender, or a paydown from contributions and rollovers. Interest is paid monthly by the fund or prepaid at settlement.
| Item | Amount |
|---|---|
| Purchase price (and assessed value) | $1,400,000 |
| Loan at 70% of assessed value | $980,000 |
| Paid by the fund from its own resources | $420,000, plus stamp duty and acquisition costs |
The 70% is measured against the lender's assessed value, not the contract price. If the valuation comes in below the price, the fund covers the difference.
An SMSF loan here is underwritten on the property and the way the facility is repaid - not on what the members earn outside the fund.
The order things happen in
Most SMSF deals that fall over do so because steps happened in the wrong order. The structure has to exist before the contract does, and the lender needs to see it early.
- Confirm with the fund's adviser that the deed permits the borrowing and the property qualifies
- Set up the holding trust and register its corporate trustee
- Send the structure to the lender for a read before anyone signs
- Exchange contracts with the holding trustee named as purchaser, paying the deposit from the fund
- Order the valuation and complete the loan documents
- Settle, with the holding trustee on title and the fund holding the beneficial interest
Costs to budget for
Beyond the deposit, a fund needs cash for stamp duty, legal fees on both the purchase and the loan, the cost of setting up the holding trust, the valuation, and the lender's establishment fee. Interest is paid monthly or prepaid, and the fund needs enough liquidity to keep paying it without relying on the property's rent alone. Borrowed money can pay acquisition costs such as stamp duty and establishment fees, but it can't fund later improvements, so any fit-out the fund plans must come from its own money.
Where this fits, and where it doesn't
SMSF property lending suits a fund acquiring a commercial property - including one leased back to a related business on commercial, arm's-length terms - or refinancing an existing facility to a lender that better understands the structure. It's not a way to access personal credit through the fund, and it's not a way to fund a renovation. The borrowing and the asset both sit inside the superannuation structure, governed by its own compliance rules.
Common questions
- Can an SMSF still borrow to buy property?
- Yes. LRBAs are not banned. For arrangements entered into on or after 10 August 2026, the real property acquired must be business real property.
- Can the fund lease the property to my business?
- Business real property can be leased to a related party, provided the lease is on commercial, arm's-length terms. Get advice on the lease before exchange.
- Can borrowed money pay for renovations?
- No. Borrowed money can't be used to improve the asset. Repairs and maintenance are treated differently to improvements, and the ATO's ruling SMSFR 2012/1 sets out where the line sits.
- Will members have to sign a personal guarantee?
- Lenders commonly ask for one, and Alphacon may. A guarantee sits outside the fund, so the limited recourse protection doesn't extend to the guarantor.
- How long is the loan?
- Alphacon lends over 6 to 60 months. Most funds plan to refinance to a long-term SMSF lender before the term ends.
Done properly, SMSF property lending lets a fund build a commercial property holding using its own resources - a genuinely different proposition to personal lending, and one that has to be structured before the contract rather than after it.
Property lending built for SMSF structures
Alphacon lends $200,000 to $5,000,000 against business real property held in a self-managed super fund, to 70% LVR, from 9.95% p.a.
SMSF commercial property loans, in fullGeneral information only
This article is general in nature and does not take your circumstances into account. It is not financial or credit advice. Alphacon Capital writes business-purpose loans secured by property.
