How limited recourse borrowing works, what the fund needs, and the rules that catch people out.
Anthony Nocon
Founder and Mortgage Broker, Financeo
Published
16 September 2026
Last revised
11 November 2026
Reading time
8 min read
TL;DRIn a nutshell
✓LRBA: your fund borrows through a limited recourse borrowing arrangement.
✓Bare trust: the property is held in a separate trust until the loan is repaid.
✓Sole purpose: the investment must be for retirement, not personal use.
✓Advice first: get financial and tax advice before setting up the structure.
How SMSF borrowing works
Under an LRBA, the lender's claim is limited to the property itself. If the loan goes wrong, other fund assets are protected.
The SMSF loan structure
1
Your SMSF
Provides the deposit and costs.
2
Bare trust
Holds the property title.
3
Lender
Lends against the property only.
4
Rent and contributions
Flow back to the fund to repay the loan.
What the fund needs
Lenders usually want a deposit of around 20% to 30%, plus a buffer of liquid assets left in the fund after settlement.
Example: $750,000 residential investment
Deposit at 30%
From fund savings
$225,000
Purchase costs
Stamp duty, legal, setup
~$40,000
Liquidity buffer
Left in the fund
~$40,000
Fund balance needed~$305,000
Rules that catch people out
You can't live in or rent a residential SMSF property to family, and you generally can't make major improvements with borrowed funds. Commercial property can be leased to your own business at market rent.
01
Buying from a relative
Residential property generally can't be bought from related parties.
02
Renovating with the loan
Improvements can't be funded by the borrowing.
03
Too little liquidity
Lenders want a buffer left in the fund.
Getting the right advice
SMSF property involves a financial adviser, accountant, solicitor and broker. We work alongside your advisers on the lending side.
"An SMSF loan is a great tool in the right situation. We make sure the lending side is lined up properly once your adviser confirms it suits your fund."
Anthony Nocon, Financeo
Quick self-check
Tick what applies to you. It's a rough guide, not an assessment.
Tick the boxes above to see where you stand.
Frequently asked questions
Yes, as an investment, provided it meets the sole purpose test and related-party rules.
This article is general information only and doesn't take your circumstances into account. Lending rules, rates and thresholds change, so check current details or speak with us before acting.
About the author
Anthony Nocon
Founder and Director of Financeo. More than a decade in lending, including commercial, business, property and private banking roles at Commonwealth Bank.
How limited recourse borrowing works, what the fund needs, and the rules that catch people out.
Anthony Nocon
Founder and Mortgage Broker, Financeo
Published
16 September 2026
Last revised
11 November 2026
Reading time
8 min read
TL;DRIn a nutshell
✓LRBA: your fund borrows through a limited recourse borrowing arrangement.
✓Bare trust: the property is held in a separate trust until the loan is repaid.
✓Sole purpose: the investment must be for retirement, not personal use.
✓Advice first: get financial and tax advice before setting up the structure.
How SMSF borrowing works
Under an LRBA, the lender's claim is limited to the property itself. If the loan goes wrong, other fund assets are protected.
The SMSF loan structure
1
Your SMSF
Provides the deposit and costs.
2
Bare trust
Holds the property title.
3
Lender
Lends against the property only.
4
Rent and contributions
Flow back to the fund to repay the loan.
What the fund needs
Lenders usually want a deposit of around 20% to 30%, plus a buffer of liquid assets left in the fund after settlement.
Example: $750,000 residential investment
Deposit at 30%
From fund savings
$225,000
Purchase costs
Stamp duty, legal, setup
~$40,000
Liquidity buffer
Left in the fund
~$40,000
Fund balance needed~$305,000
Rules that catch people out
You can't live in or rent a residential SMSF property to family, and you generally can't make major improvements with borrowed funds. Commercial property can be leased to your own business at market rent.
01
Buying from a relative
Residential property generally can't be bought from related parties.
02
Renovating with the loan
Improvements can't be funded by the borrowing.
03
Too little liquidity
Lenders want a buffer left in the fund.
Getting the right advice
SMSF property involves a financial adviser, accountant, solicitor and broker. We work alongside your advisers on the lending side.
"An SMSF loan is a great tool in the right situation. We make sure the lending side is lined up properly once your adviser confirms it suits your fund."
Anthony Nocon, Financeo
Quick self-check
Tick what applies to you. It's a rough guide, not an assessment.
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Frequently asked questions
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This article is general information only and doesn't take your circumstances into account. {{ discText }}
About the author
Anthony Nocon
Founder and Director of Financeo. More than a decade in lending, including commercial, business, property and private banking roles at Commonwealth Bank.
