SMSF Loans

At Lexor Finance, we work with clients across Truganina, Victoria and throughout Australia who are looking to understand how borrowing within a Self-Managed Super Fund works. SMSF loans are a specialist area of finance, and the rules that govern them have changed significantly in 2026. This page sets out the key information you need before speaking with a licensed SMSF specialist.

What Is an SMSF Loan?

A Self-Managed Super Fund loan allows an SMSF to borrow money to acquire an asset through a structure known as a Limited Recourse Borrowing Arrangement, or LRBA. Under an LRBA, the asset is held in a separate holding trust while the loan is being repaid. The SMSF holds a beneficial interest in the asset and acquires legal ownership once the loan is fully repaid. If the loan defaults, the lender's recourse is limited to the asset held in trust. Other fund assets are protected. Investment returns, including SMSF rental income, flow directly to the fund.

Borrowing is generally prohibited for superannuation funds under the Superannuation Industry (Supervision) Act 1993. Sections 67A and 67B of that Act provide the exception through the LRBA structure. The SMSF bare trust arrangement is a key part of how this works in practice. Lexor Finance can help you understand how lenders assess these structures and what documentation is typically required as part of an SMSF loan application.

The 2026 Changes to Residential SMSF Loans

From 10 August 2026, new LRBAs entered into to purchase real property can only be used to acquire business real property. This change was introduced by the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which received Royal Assent on 26 June 2026. The new rules commenced on 10 August 2026, as confirmed by the ATO.

This means that from that date, a new SMSF mortgage broker arrangement cannot be used to purchase residential property under an LRBA. SMSFs may still own residential property, and may acquire it without borrowing, subject to the usual SIS Act rules. Existing residential LRBAs entered into before 10 August 2026 are not affected. Where a binding contract to acquire real property was exchanged before 10 August 2026, the transitional provisions may apply even if settlement occurs after that date. Readers should seek advice from a licensed SMSF specialist before acting on this information, as the ATO was still updating certain guidance pages as at 10 August 2026.

SMSF Commercial Loans

A Commercial SMSF property loan remains fully available under the post-2026 framework. An SMSF commercial loan can be used to acquire business real property, which is generally defined as land and buildings used wholly and exclusively in one or more businesses. The business does not need to be carried on by the entity holding the property. Whether a property qualifies as business real property depends on its actual use at the time of acquisition and is a question of fact. A property described or marketed as commercial does not automatically satisfy the definition.

For business owners, the ability to buy a commercial property with super is one of the more compelling uses of an SMSF. A related party, such as a business operated by a fund member, may lease business real property from the SMSF, provided the lease is on arm's length terms at market value. This arrangement is excluded from the in-house asset rules under the SIS Act. Using super to buy a commercial investment property in this way requires careful structuring and professional advice.

When comparing SMSF lenders, it is important to understand how each lender assesses loan LVR and deposit requirements for SMSF commercial loans. Lenders typically apply more conservative LVR limits for SMSF lending than for standard commercial loans. Loan interest rate settings also differ between lenders, and both variable rate and SMSF fixed rate options may be available depending on the lender and the loan structure. Lexor Finance can help you compare SMSF lenders and understand what each is looking for when assessing your borrowing capacity.

The Sole Purpose Test

All SMSF investments, including property held under an LRBA, must satisfy the SMSF sole purpose test at all times. This test, set out in section 62 of the SIS Act, requires that the fund be maintained solely to provide retirement benefits to its members. Any decision that gives a member or related party a present-day personal benefit may contravene this requirement. This applies equally to residential and commercial property held within the fund.

Tax Considerations

SMSF rental income tax is assessed at the concessional rate of 15 percent in the accumulation phase. Where an eligible asset has been held for at least 12 months, a one-third CGT discount may apply, producing a maximum effective rate of 10 percent on the discounted gain. This is the SMSF CGT discount, and the actual outcome depends on the property's cost base, selling costs, capital improvements, capital losses, and the fund's overall tax position for that year.

In pension phase, a capital gain may be partially or fully exempt under the exempt current pension income rules, depending on the method used and the fund's specific circumstances. From 1 July 2026, Division 296 tax applies where a member's total superannuation balance exceeds $3 million. Rental income and realised capital gains may contribute to the Division 296 earnings calculation. LRBA amounts are disregarded when calculating a member's total superannuation balance for Division 296 purposes. An SMSF may elect to adjust the cost base of CGT assets to market value as at 30 June 2026 for Division 296 fund earnings purposes, and this election must be made by the due date of the 2026-27 SMSF annual return.

Refinancing an Existing SMSF Loan

The 2026 changes do not affect the refinancing of residential LRBAs that were in place before 10 August 2026. A residential loan refinance in this context means entering into a new loan contract for the same asset, with the same or a new lender. Trustees with compliant residential LRBAs established before 10 August 2026 can refinance without the new arrangement being treated as a post-commencement arrangement, provided the refinancing is consistent with the original arrangement. For commercial loan refinancing, the same compliance conditions continue to apply, including that the refinanced loan must relate to the same single acquirable asset and maintain the limited recourse character of the original arrangement.

The ATO publishes safe harbour interest rates for SMSF LRBAs under Practical Compliance Guideline PCG 2016/5, updated annually. Where an arrangement does not meet arm's length terms, income from that arrangement may be assessed as non-arm's length income and taxed at the highest marginal rate of 45 percent. Lexor Finance works alongside your SMSF adviser and accountant to help ensure the loan structure is appropriate and that lender requirements are met. For clients interested in investment loans or commercial loans more broadly, we are equally well placed to assist.

Step 1: Initial Conversation
We start with a simple chat to get to know you and understand what you are looking for. Whether you are buying a home, investing in property, or looking for a business loan, this is your chance to ask questions and share your goals. There is no obligation and no pressure.

Step 2: Understanding Your Situation
Next, we take a closer look at your financial position. We will ask about your income, expenses, assets, and any existing debts. This helps us build a clear picture of where you stand and what options are available to you.

Step 3: Researching Your Options
With access to a wide panel of lenders, we do the legwork for you. We compare loan products, interest rates, fees, and features to find solutions that suit your needs and goals - not just the first option that comes along.

Step 4: Presenting Our Recommendation
We present you with a clear recommendation and explain why it is the right fit for your situation. We walk you through the numbers in plain language so you can make a confident, informed decision.

Step 5: Preparing Your Application
Once you are happy to move forward, we prepare your application and gather the required documents. We handle the details carefully to give your application the best possible chance of approval.

Step 6: Lodging and Managing Your Application
We submit your application to the lender and stay on top of the process from there. We liaise with the lender on your behalf, respond to any requests quickly, and keep you updated every step of the way.

Step 7: Settlement and Beyond
Once your loan is approved and settled, our job is not done. We check in with you regularly to make sure your loan is still working for you. As your circumstances change, we are here to review your options and help you stay on track.