In short: An SMSF loan lets your self-managed super fund borrow to buy a single property under a limited recourse borrowing arrangement (LRBA). A bare trust holds the title, the lender's recourse is limited to that asset, and rent plus contributions repay the loan. Lenders typically want a 20% to 30% deposit from the fund and a liquidity buffer. GNT Finance arranges the finance and coordinates with your accountant and lawyer.
Buying property through super appeals to business owners who want their fund to own the premises they trade from, and to investors who like a rental asset growing in a low-tax environment. It is also the most rule-bound loan a broker can arrange: the structure must be right before the contract is signed, and only a small group of lenders offer it.
Funds this suits
- Business owners whose SMSF buys the factory, warehouse, shop or clinic the business then leases at market rent. This is the most common use, and overlaps with our commercial property loans service.
- Established funds with roughly $250,000 or more, enough for a 20% to 30% deposit, costs and a liquidity buffer.
- Investors who want a residential rental in Craigieburn, Wollert or Mernda held inside super, accepting that no member or relative can ever live in it.
How the structure fits together
An LRBA involves four parties and two trusts:
- The SMSF trustee (usually a company) applies for the loan and makes repayments from the fund's account.
- The bare trust holds legal title on behalf of the fund until the loan is repaid, when title can transfer to the fund.
- The lender takes a mortgage over the property only. On default it can sell the property but cannot pursue the fund's other assets, which is what "limited recourse" means.
- Members usually give personal guarantees outside the fund as the lender's fallback.
The trust deed must permit borrowing, the investment strategy must contemplate the purchase, and the contract must be signed by the bare trustee, not the SMSF. A wrong name on the contract can trigger double stamp duty or unwind the deal. Read our SMSF property investment guide before you go to an auction.
Our process for SMSF finance
- Feasibility. We check the fund's balance, contributions and the target property against lender policy. Serviceability is tested at the loan rate plus a 3 percentage point buffer, using shaded rent and contributions.
- Team alignment. We coordinate with your accountant and a lawyer who sets up the bare trust and corporate trustees. Structure comes before property.
- Lender selection. We compare the specialist lenders on rate, LVR, minimum balance, liquidity rules and residential versus commercial appetite.
- Pre-approval and purchase. We check the contract is in the bare trustee's name before it is signed.
- Settlement and ongoing. Rent flows into the fund's account, the auditor reviews the arrangement annually, and we review the loan periodically because refinancing an LRBA is possible.
Residential versus commercial SMSF loans
| Feature | Residential SMSF loan | Commercial SMSF loan |
|---|---|---|
| Maximum LVR | Typically 70–80% | Typically 65–75% |
| Minimum deposit from fund | 20–30% plus costs | 25–35% plus costs |
| Can a related party occupy? | No | Yes, at market rent under a formal lease |
| Rental income counted | Usually 80% of appraisal | Usually 70–80% of lease |
| Interest rate | Higher than standard investor rates | Higher again, often 0.5–1 point above residential SMSF |
| Loan term | Up to 30 years | Often 15–25 years |
| Typical lender | Non-bank and specialist lenders | Non-bank, specialist and some mutual banks |
| Liquidity requirement | Often 10% of property value left in the fund | Similar, sometimes higher |
Commercial property inside super is popular with tradies and professionals across Melbourne's north because the business pays rent to the fund instead of a landlord, taxed at 15% rather than marginal rates.
Lender requirements and paperwork
- SMSF trust deed (showing borrowing is permitted), bare trust deed and corporate trustee documents
- The fund's last two years of financial statements and tax returns, plus member statements
- Current investment strategy referencing property and borrowing
- Evidence of contributions (employer statements or business financials)
- Rental appraisal or lease for the property, contract of sale, and a valuation
- Member ID and personal financials for guarantees, plus evidence of post-settlement liquidity
Minimum balances vary by lender from around $150,000 to $300,000. A new fund can borrow once members' rollovers have landed.
Worked example: a warehouse in Craigieburn bought through super
A couple running a plumbing business in Roxburgh Park have a combined SMSF balance of $420,000. They find a 250-square-metre warehouse in Craigieburn for $700,000 that their business currently leases from a third party at $48,000 a year.
Deposit and costs. At 70% LVR the loan is $490,000 and the fund contributes $210,000. Victorian duty on $700,000 is $2,870 plus 6% of $570,000, which is $37,070. Bare trust legal work and conveyancing add about $6,000, and lender fees roughly $3,500. Total outlay is about $256,600, leaving around $163,000 in the fund, well above the lender's 10% liquidity requirement of $70,000.
Repayments. For illustration, at 6.00% p.a. over 25 years, $490,000 costs about $3,157 a month, or $37,884 a year. The business pays the fund $48,000 in rent under a formal lease, so rent alone covers repayments with about $10,000 to spare before outgoings, and $30,000 a year of employer contributions adds further capacity.
Tax inside the fund. Net rent is taxed at 15% in accumulation phase. A capital gain after twelve months is taxed at an effective 10%, and potentially nil in pension phase, against 37% for an individual on that marginal rate. Our capital gains tax on property page covers the personal rules, and the investment property cash flow calculator models rent against repayments.
Land tax. Land tax applies to the site value, and trusts can face surcharge rates in Victoria. Estimate the base amount with the Victorian land tax calculator and confirm with your accountant.
What an SMSF loan costs
| Cost | Typical range |
|---|---|
| Bare trust and corporate trustee setup (legal) | $2,000–$5,000 |
| SMSF establishment if you do not already have one | $2,000–$4,000 |
| Lender application fee | $1,000–$2,500 |
| Valuation | $500–$2,000 (higher for commercial) |
| Lender legal or document review fee | $1,000–$3,000 |
| Interest rate premium over standard investor loans | Roughly 1–2 percentage points |
| Annual SMSF audit and administration | $2,000–$5,000 per year |
| Stamp duty on the purchase | Full general rate, no concessions |
Getting it wrong costs more. An LRBA that breaches the single acquirable asset rule, houses a related party, or borrows to improve rather than repair can make the fund non-complying, with tax consequences that dwarf any saving. We insist on a specialist SMSF lawyer and accountant on every file.
Pitfalls we help clients avoid
- Signing the contract in the wrong name. The bare trustee must be the purchaser.
- Draining the fund's liquidity. A fund holding only the property cannot pay insurance, pensions or repairs. Lenders and auditors both check.
- Assuming contributions will always be there. In a bad year rent must carry the loan alone. Stress-test for a vacancy.
- Forgetting the exit. Refinancing an LRBA is harder than a home loan, and the fund may want to sell at retirement. Plan the asset's whole life.
Why arrange SMSF finance through a broker
Fewer than a dozen lenders offer SMSF loans, most banks have left the market, and the remaining policies change often. A broker who deals with those lenders regularly knows which will accept a new fund, which will lend on an industrial estate, and which will count business contributions as income. Gorakh Timilsina's years assessing complex applications as a Senior Credit Officer matter here, because SMSF files are approved on the quality of structure and documentation rather than headline numbers. The lender pays our commission at settlement, so there is no cost to you for our loan service in most cases, and we act under a legal Best Interests Duty. To compare holding a rental personally, see investment property loans.
Frequently asked questions
How much does my SMSF need before it can borrow for property?
Most lenders want a minimum balance of $150,000 to $300,000, and in practice the fund needs enough for a 20% to 30% deposit, full-rate stamp duty, legal and lender fees, and a liquidity buffer of around 10% of the property value. For a $600,000 purchase that usually means at least $220,000 in the fund.
Can my SMSF buy a house for me or my children to live in?
No. Residential property in an SMSF cannot be lived in or rented by a member or any related party, even at market rent. Commercial property is different: your own business can lease it from the fund on arm's-length terms. Breaching the residential rule can make the fund non-complying.
Can I use borrowed money to renovate an SMSF property?
Borrowed funds can pay for repairs and maintenance that keep the property in its existing condition, but not for improvements that change its character, such as adding a room or converting a house to units. Improvements can be paid from the fund's own cash, within limits. Ask your SMSF accountant first.
What happens to the loan when I retire?
The loan continues and the fund keeps repaying it from rent. In pension phase, rental income and capital gains on the property can become tax-free, which is one of the main attractions. Many members aim to clear the loan before retirement so the full rent can fund pension payments.
Are SMSF loan rates higher than normal investment loan rates?
Yes, usually by one to two percentage points, because the lender's recourse is limited to one property and the loan is more complex to administer. Fees are higher too. Because the fund pays 15% tax rather than your marginal rate, many members still find the after-tax result compelling, but do the comparison properly with your accountant.
Talk to GNT Finance
If you are weighing up property inside super, we will run the feasibility, coordinate with your accountant and lawyer, and shortlist the lenders that fit your fund. We are based in Mickleham, serve all of Melbourne and Victoria, and work in English, Nepali and Hindi. Book a free consultation or call 0426 403 703.
This page is general information only and not legal, tax or financial advice. Laws change — confirm current rules with the State Revenue Office, the ATO or a licensed professional.
Written by Gorakh Timilsina
Founder, CEO & Senior Mortgage Consultant at GNT Finance. Gorakh started as a broker assistant, spent years as a senior credit officer assessing loan applications, and now helps Melbourne families get the right loan approved. English, Nepali and Hindi spoken.