Understanding the Restrictions of SMSF Lending

SMSF lending can be a powerful strategy — but it is also one of the most tightly regulated areas of property finance.

The restrictions aren’t there to make things difficult. They exist to protect your retirement savings and ensure the strategy is used for long-term investment, not short-term gain.

Here’s a clear, plain-English overview of the key restrictions you need to understand before considering SMSF lending.

Limited Recourse Borrowing Arrangement (LRBA)

All SMSF property loans must be set up under a Limited Recourse Borrowing Arrangement.

This means:

• The loan is secured against a single asset (the property)
• The lender’s rights are limited to that asset only
• Other SMSF assets are protected

You can’t cross-collateralise or use personal assets as security.

Single Acquirable Asset Rule

SMSF loans can only be used to acquire a single, identifiable asset.

This usually means:

• One residential property, or
• One commercial property

You generally can’t use an SMSF loan to buy multiple properties under one loan.

No Improvements Using Borrowed Funds

One of the most misunderstood rules.

Borrowed f