Lending done through a Self‑Managed Super Fund, which allows the fund’s trustees to borrow money (via a structure called a Limited Recourse Borrowing Arrangement, or LRBA) to acquire investment property (commercial or residential) for the fund. The property is held in a bare trust until full repayment, after which the legal title moves to the SMSF.
| Feature | Details |
|---|---|
| LRBA (Limited Recourse Borrowing Arrangement) | The lender’s recourse (if loan defaults) is limited to the property acquired; other assets in the SMSF are protected. |
| Bare Trust / Custodian Trust | Holds the property title until the loan is paid off. SMSF trustees receive the economic benefits (rent, etc.) while the legal title remains in the trust. |
| Compliance / Regulatory rules | Must meet requirements such as the “sole purpose test,” contribution rules, liquidity verification, and avoiding any personal or related-party benefits. |
| Loan terms / LVR | SMSF loans usually have lower Loan to Value Ratios (LVR), typically around 60–80%, depending on the property and the fund’s strength. |
| Costs | Includes higher setup and legal costs, annual audits, compliance checks, property valuations, accounting fees, and trust deed expenses. |
