SMSF property investment guide.
A working guide to buying property inside a self-managed super fund. The LRBA structure, eligibility, the specialist lender panel, costs, common mistakes, and the situations where SMSF property does not suit.
What SMSF property investment is.
A specific legal arrangement, not a relabelled investment loan. Worth being plain about up front.
An SMSF property is a piece of real estate owned by a self-managed superannuation fund rather than by you personally. The members of the fund (usually one to six related people) are also the trustees, and the trustees hold the property on behalf of the fund's members for the sole purpose of providing retirement benefits.
Because superannuation law generally prohibits a fund from borrowing, an SMSF purchasing property with debt has to use a specific carve-out called a Limited Recourse Borrowing Arrangement, set out in Section 67A of the Superannuation Industry (Supervision) Act 1993. The LRBA is the only legal route for an SMSF to take on debt to buy a single asset. The SMSF borrowing guide covers the legal framework end to end.
The appeal is the tax treatment. Rental income inside the fund is taxed at 15% in accumulation phase, and 0% in pension phase. Capital gains on assets held over twelve months are taxed at an effective rate of 10% in accumulation, and 0% in pension. The cost is structural: more administration, less flexibility, and a long set of rules that punish small mistakes.
This guide is general information. SMSF strategies are personal by nature, and any decision should be made with personal advice. See our Financial Services Guide and Credit Guide for the full scope of how we operate.
Eligibility, in practice.
There is no single statutory minimum balance to set up an SMSF, but there is a practical floor below which the structure stops making sense. Most accountants and advisers will not recommend an SMSF for property purchase if the combined member balance is much under $200,000. The fixed costs of running the fund (audit, accounting, ASIC fees, insurance, the bare trust) eat too much of a smaller balance to justify the structure.
Above the balance question, there are three other practical tests. First, you need to be old enough that the time horizon to preservation age allows the investment to amortise the set-up costs. Second, you need cash flow inside the fund (mostly from concessional contributions and rent) to service the loan comfortably with a buffer. Third, the trustees have to be willing to actually run the fund. Being an SMSF trustee carries legal responsibilities that an APRA-regulated fund handles for you.
Contribution caps are the other constraint people overlook. Concessional contributions are capped at $30,000 per member per year (current as at this guide's date, indexed periodically). Non-concessional contributions are capped at $120,000, with bring-forward arrangements for younger members. If your strategy depends on rapidly building the fund balance via contributions to support the loan, the caps will be the binding constraint. The wider superannuation advice piece usually has to run alongside the lending conversation.
How the SMSF loan structure works.
Three moving parts you have to set up before contracts are signed.
Bare trust
A separate trust, with its own trustee, holds the legal title to the property until the LRBA is repaid. The SMSF holds the beneficial interest the whole time. The deed has to be executed before contracts are signed.
Corporate trustee
Most lenders require a corporate trustee for both the SMSF and the bare trust. Individual trustees can be done in some cases, but the corporate set-up is cleaner for succession, audit and lender preference.
Single acquirable asset
Each LRBA can hold one asset only. One title, one dwelling, or one commercial premises. Two units in the same block on separate titles need two LRBAs, set up separately.
Limited recourse
If the SMSF defaults, the lender's recourse is limited to the asset held in the bare trust. The fund's other assets are quarantined. This is why pricing is higher than a standard loan.
Repairs not improvements
Borrowed funds cannot be used for substantial improvements while the loan is in place. Repairs and maintenance are fine. Character-changing works wait until the LRBA is paid off.
Sole purpose test
Every trustee decision has to be defensible against the test that the fund exists to provide retirement benefits to members. Personal-use elements undo the structure.
Who writes SMSF loans today.
The majors largely exited SMSF lending some years ago. The active panel is specialist and non-bank.
La Trobe Financial. One of the larger and more consistent non-bank SMSF lenders in the market. Reasonable rates for clean files, with established processes for both residential and commercial SMSF. Often the default starting point on the comparison.
Mortgage Ezy. Specialist in the SMSF space with competitive pricing for stronger files. Helpful where the LVR is at the higher end of what an SMSF can usually borrow, and where serviceability sits tightly.
Pepper Money. A broader non-bank lender that holds an SMSF product line. Useful for files that need flexibility on credit history or income evidence, and where the lender's servicing calculator is more accommodating.
Granite Home Loans. A smaller, specialist option that occasionally wins on rate or on a particular file pattern. Worth comparing on every SMSF loan so we're not just defaulting to the largest player.
Pricing across the panel is materially higher than a standard owner-occupier loan, usually somewhere in the order of 1% to 2% above the cheapest residential rate available. Maximum LVRs are typically 70% for residential and 65% to 70% for commercial inside an SMSF. Liquidity tests (cash held in the fund after settlement) vary between lenders. Our SMSF lenders compared page sets out the current panel side-by-side.
Residential or commercial.
The structure is broadly the same, but the rules around use and tenancy diverge meaningfully. Most SMSF property strategies fall into one of these two patterns.
The familiar option.
Easier to value, easier to tenant, easier for lenders to underwrite. The hard rule: no member or relative can live in the property at any time while the SMSF owns it. Standard arm's length residential tenancies only. See SMSF property loans for the residential LRBA detail.
The business-owner option.
Business real property held inside an SMSF can be leased back to a related-party business, at arm's length rent under a written lease. For business owners already paying commercial rent, this is often the most attractive single use of an SMSF. The SMSF commercial property page walks through the related-party leasing rules.
Where SMSF property files come unstuck.
Most contraventions trace back to a small number of mistakes, made early, often by someone trying to save on set-up.
- Contracts signed in the wrong name
If the SMSF or bare trust is not set up before the contract is signed, the contract is in the wrong name. State revenue offices typically treat any later change of buyer as a fresh transaction. Stamp duty can end up payable twice.
- Substantial improvements during the loan
Knock-down rebuilds, structural extensions, and works that change the character of the asset are all prohibited until the LRBA is paid off. The trustee can still do them with the fund's own cash after the loan is settled, just not with borrowed money.
- Wrong title structure
Two titles bundled into one LRBA breaks the single acquirable asset rule. This is hard and expensive to unwind after settlement.
- Member-related residential leasing
Renting an SMSF residential property to a member or a relative, even at market rates, is a contravention. The in-house asset rules do not allow it.
- Insurance lost in the rollover
Members roll their super into the new SMSF to fund the deposit, and lose existing life or TPD cover held in the previous fund. Review life and TPD insurance before the rollover, not after. Often a separate retail policy needs to be put in place first.
- Inadequate liquidity buffer
Using almost the entire fund balance as deposit leaves no buffer for vacancies, repairs, or a contribution gap. Lenders test for this, but the trustee duty exists either way.
The real cost of running this.
Set-up costs for a new SMSF, bare trust, and corporate trustees usually run between $3,000 and $6,000 one-off, depending on the accountant. Some firms quote lower by using template deeds, but the more reputable end of the market sits in that range. Stamp duty on the property is unchanged from a personal purchase, and is paid out of the fund.
Ongoing administration sits in the order of $2,000 to $4,000 a year, covering the audit (mandatory annually), accounting, and ATO lodgement. Some accountants bundle this on a flat-fee subscription, others charge by complexity. Add the ASIC annual fee for the corporate trustee (around $60 to $300 a year), and SMSF insurance through the fund where appropriate.
Loan costs are the other piece. SMSF loan interest rates sit materially above standard owner-occupier rates, often by 1% to 2%. Application fees, valuation fees, and ongoing fees vary by lender. There is no SMSF-specific lenders mortgage insurance in the standard sense because LVRs are capped low enough to avoid it on most files. Where the wider household balance sheet is in scope, the property investment hub covers how SMSF property sits alongside personally held investments.
- Set-up (one-off)
- $3,000 to $6,000 through accountant
- Ongoing admin
- $2,000 to $4,000 per year
- ASIC annual fee
- $60 to $300 per corporate trustee
- Audit
- Annual, mandatory, by independent auditor
- Loan premium
- Typically 1% to 2% above owner-occupier rates
- Max LVR (residential)
- Around 70%, lender-dependent
When SMSF property does not suit.
The structure is genuinely useful for the right client. It is the wrong answer for plenty of others. Worth being plain about both.
Fund balance under $200,000
The fixed costs of running the structure eat too much of a smaller balance. Below $150,000 we generally recommend leaving the super where it is and looking at the goal a different way.
Short time horizon to retirement
If the member is within five to seven years of preservation age, an LRBA may not have time to deliver a return that justifies the set-up costs, and the property may need to be sold or transferred close to the planned retirement date.
Need to live in the property
If the long-term plan is to live in the property yourself, an SMSF is the wrong owner. The earliest you could move in is after the property is transferred out, which is its own tax event.
Plans for major improvements
If the strategy includes a knock-down rebuild or a substantial extension, those works cannot be funded by borrowed money inside an SMSF. The trustee can do them with the fund's own cash after the loan is paid, but not before. A standard construction loan in personal names sits with finance broking instead.
Concentration risk too high
If the property would represent the overwhelming majority of fund assets, the investment strategy starts to look thin. Diversification is part of the trustee duty under the SIS Act.
No appetite for the admin
Being a trustee carries real legal responsibility. APRA-regulated funds do most of the work for members. SMSFs do not. If you do not want to be that involved, the structure is the wrong fit.
Questions on SMSF property.
As a working rule, a combined fund balance of around $200,000 makes the running costs and the LRBA structure stack up. Below $150,000 the fixed costs eat too much of the return. Some specialist lenders also set their own minimums for liquidity and serviceability, which in practice pushes the floor higher again.
Not while the SMSF owns it. Residential property held inside an SMSF cannot be lived in by a member or a related party at any time. The earliest you could move in is after the property is transferred out of the fund, which is its own capital gains and stamp duty event.
Repairs and maintenance are fine. So is restoring damaged parts of the building. What is not allowed is using borrowed funds for substantial improvements that change the character of the asset. A new kitchen is usually acceptable. A second-storey addition or a knock-down rebuild is not, until the LRBA is repaid.
Neither is universally better. Commercial property held inside an SMSF can be leased back to a member's own business at arm's length rent, which is a meaningful advantage for business owners. Residential is more familiar and easier to value, but cannot be used by members or relatives. The right answer depends on what other assets are in the fund, your business position, and your time horizon.
The major banks largely exited SMSF lending several years ago. The active panel today is specialist and non-bank: La Trobe Financial, Mortgage Ezy, Pepper Money, Granite Home Loans, Liberty, Firstmac and a few others. Pricing and policy vary widely between them. See our SMSF lenders compared page for the side-by-side.
A reasonable budget for the set-up of a new SMSF plus the bare trust and corporate trustees is around $3,000 to $6,000 one-off through your accountant. Ongoing audit and admin runs around $2,000 to $4,000 a year, depending on the complexity of the fund. Stamp duty on the property purchase is separate and unchanged from a personal-name buy.
For a new fund being set up alongside the purchase, allow 8 to 12 weeks comfortably. The bare trust deed has to be executed before the contract is signed, the SMSF needs to be established and registered with the ATO, and the lender needs to assess the file. Rushed timelines are where most of the costly mistakes happen.
Read further
- SMSF pillarHow Opes does SMSF advice and lending together.
- SMSF property loansResidential LRBA detail, the bare trust, eligibility.
- SMSF commercial propertyBusiness real property and related-party leasing.
- SMSF lenders comparedThe active panel, side-by-side.
- SMSF borrowing guideThe legal framework and common pitfalls.
- Retirement planning guideWhere SMSF property fits in a broader retirement plan.
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