SMSF Lending: Practical Tips & Tricks to Get It Right
SMSF lending can be a powerful way to invest in property through super — but it’s not forgiving if mistakes are made.
The difference between a strong long-term strategy and an expensive compliance headache often comes down to the small details.
Here are practical tips and tricks we see make the biggest difference.
Tip #1: Start With the Investment Strategy (Not the Property)
One of the most common mistakes is finding a property first and trying to make it “fit” the SMSF.
Your SMSF investment strategy must support:
- Property as an asset class
- Borrowing risk
- Liquidity needs
If it doesn’t, the strategy may fail before it starts.
Tip #2: Keep Borrowing Conservative
Just because a lender allows borrowing doesn’t mean it’s wise to push limits.
Lower loan-to-value ratios reduce:
- Cash flow pressure
- Risk during vacancies
- Stress during rate rises
Tip #3: Choose the Right Property Type
Not all properties work well in an SMSF.
Focus on:
- Strong rental demand
- Low vacancy risk
- Minimal ongoing capital expenditure
Avoid properties that rely on future improvements to perform.
Tip #4: Maintain Strong Cash Buffers
Liquidity matters.
Your SMSF should retain enough cash to cover:
- Loan repayments
- Property expenses
- Unexpected costs
Cash buffers are one of the best risk-management tools available.
Tip #5: Understand Repair vs Improvement Rules
This is where many SMSF property strategies fall over.
Borrowed funds can usually be used for repairs and maintenance — but not for improvements that change the asset’s character.
Know the difference before committing.
Tip #6: Structure Everything Correctly From Day One
SMSF lending requires:
- Correct trust structures
- Specialised loan documentation
- Proper legal ownership setup
Fixing mistakes later can be expensive or impossible.
Tip #7: Plan Contributions Around Cash Flow
Loan repayments must be made from the SMSF.
Personal contributions (within caps) can help support cash flow — but they must be planned carefully to remain compliant.
Tip #8: Stress-Test the Strategy
Ask:
- What happens if interest rates rise?
- What if the property is vacant?
- What if contributions reduce?
If the strategy only works in perfect conditions, it’s too risky.
Tip #9: Work With SMSF-Specific Professionals
SMSF lending is not standard lending.
Using brokers, accountants, and advisers experienced in SMSF strategies helps avoid compliance breaches and lender issues.
Tip #10: Remember the End Goal
SMSF lending is about retirement outcomes — not short-term gains.
Every decision should be filtered through the question:
“Does this improve my long-term retirement position?”
The Smart Way Forward
SMSF lending can be powerful when it’s planned, conservative, and compliant.
Shortcuts and assumptions are where things go wrong.
Want Help Applying These Tips to Your SMSF?
If you’re considering SMSF lending, a conversation can help you:
- Assess whether the strategy suits your fund
- Avoid common pitfalls
- Structure the loan correctly from the start
Book an SMSF Lending Strategy Conversation
In SMSF lending, the small decisions make the biggest difference.
