SMSF Home Loans: What Every Trustee Should Know

Can your SMSF borrow to buy property?

Yes — since 2007, SMSFs have been permitted to borrow to acquire assets including residential and commercial property under a Limited Recourse Borrowing Arrangement (LRBA). The rules are strict, and getting the structure wrong can trigger significant tax and compliance consequences.

The sole purpose test

Any property purchased by an SMSF must be held solely to provide retirement benefits to members. You cannot live in the property, use it for holidays, or allow related parties to occupy it at below-market rent.

What types of property qualify?

• Residential property — houses, units, townhouses.
• Commercial property — offices, warehouses, retail premises.
• Business real property leased to a related party at market rates.

Vacant land, off-the-plan purchases during construction and properties requiring significant development generally do not qualify under an LRBA.

The SMSF itself cannot hold title during the loan — a separate bare trust must be established before the purchase settles. This is a legal requirement, not optional.

SMSF loan requirements

• The fund needs sufficient cash for the deposit (typically 20–30%) and purchase costs.
• Serviceability is assessed on contributions, rental income and investment returns.
• All members may need to provide personal guarantees.
• An independent valuation is required at settlement and annually for compliance.

Get specialist advice

SMSF loans involve super rules, tax rules and lending rules all at once. Before you go ahead, speak with a specialist SMSF broker, an SMSF auditor and a lawyer who knows SMSF property loans.