SMSF Lending: Frequently Asked Questions
SMSF lending can be a powerful way to invest in property through super, but it’s also one of the most regulated and misunderstood strategies.
Below are the most common questions we’re asked when people are considering SMSF lending — answered clearly and honestly.
What is SMSF lending?
SMSF lending allows a self-managed super fund to borrow money to purchase a property using a Limited Recourse Borrowing Arrangement (LRBA).
The loan is held by the SMSF and secured only against the specific property being purchased.
Why do people use SMSF lending?
People typically use SMSF lending to invest in property within super, diversify their retirement assets, and potentially grow wealth in a tax-effective environment.
It’s often considered by those who prefer property as a long-term investment.
Can I live in or use the property myself?
No.
Residential SMSF property cannot be lived in or rented by you or any related party.
Commercial property may be leased to a related business — but only on genuine commercial terms.
What are the main benefits of SMSF lending?
The key benefits include:
- Ability to invest in property through super
- Tax-effective income and capital gains
- Limited recourse loan structure
- Long-term retirement-focused investing
- Greater control over investment decisions
What are the biggest downsides?
The main drawbacks are:
- Strict regulatory restrictions
- Lower borrowing capacity and higher deposits
- Higher interest rates and setup costs
- Liquidity risk due to property being illiquid
- Ongoing compliance and administration requirements
How much can an SMSF borrow?
Borrowing limits are lower than standard home loans.
Most lenders cap SMSF loans at lower loan-to-value ratios (often around 60–70%), depending on the property type and fund strength.
Can borrowed funds be used to renovate the property?
No — not for improvements.
Borrowed funds can generally only be used for repairs and maintenance, not for improvements that change the nature of the property.
Is SMSF lending high risk?
It can be — if done poorly.
SMSF lending magnifies both gains and losses. The risk is higher if:
- The fund lacks cash flow or reserves
- The property is poorly selected
- The strategy isn’t aligned with the SMSF investment strategy
Do I need an SMSF before applying for a loan?
Yes.
The SMSF must already be established, compliant, and have a suitable investment strategy before SMSF lending can proceed.
Can I use my personal income to help with repayments?
Indirectly, yes.
Repayments must come from the SMSF, but personal contributions to super (within caps) can help support cash flow.
Is SMSF lending suitable for everyone?
No.
SMSF lending is generally better suited to people who:
- Have strong and stable income
- Can make ongoing super contributions
- Are comfortable with long-term strategies
- Understand the compliance obligations
What happens if the strategy doesn’t work?
Because the loan is limited recourse, the lender’s claim is restricted to the property itself.
However, losses still affect your retirement savings, so the strategy needs to be carefully stress-tested.
Should I get advice before proceeding?
Absolutely.
SMSF lending requires coordination between brokers, accountants, and legal advisers to ensure compliance and suitability.
How can a broker help with SMSF lending?
As brokers, we help you:
- Understand lender rules and restrictions
- Assess whether SMSF lending suits your fund
- Structure the loan correctly
- Avoid costly mistakes and compliance issues
Want to Know If SMSF Lending Is Right for You?
SMSF lending can be powerful — but only when it’s the right fit.
A conversation can help you understand whether the strategy makes sense for your super, your goals, and your long-term retirement plans.
Book an SMSF Lending Strategy Conversation
The best SMSF strategies are built on clarity, not assumptions.
