The SMSF lending guide.

A Limited Recourse Borrowing Arrangement is the structure the ATO requires for an SMSF to borrow money to acquire an asset. During the loan, the SMSF doesn't hold the asset directly. A separate bare trust holds legal title and the SMSF holds the beneficial interest. The loan is limited recourse, meaning the lender can claim only against the specific asset in the bare trust, not the fund's other assets.

The order of setup matters: the bare trust must exist before contracts are signed. Get this wrong and you may not be able to complete the transaction correctly, which can lead to compliance issues the ATO will notice.

From 10 August 2026 the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 added one more rule. A new LRBA over real property is only permitted where the asset is business real property. Residential investment property no longer qualifies.

New SMSF borrowing for residential property ended on 10 August 2026. Residential LRBAs entered into before that date are grandfathered and continue as normal, a contract exchanged before that date is protected even if it settled afterwards, and an existing residential LRBA can still be refinanced. A fund can also still buy residential property outright without borrowing, subject to the usual rules: no related-party purchases, no member use.

SMSF commercial lending is now the only path for new borrowing, and it remains the more flexible one. The 'business real property' exception lets the SMSF borrow to buy commercial property from a related party (including the members' own business) and lease it back on arm's-length commercial terms. It's the most common way to move a business's trading premises into an SMSF over a 20-year horizon.

The major banks and most second-tier banks do not accept SMSF applications. The active panel is a group of non-bank and specialist lenders, and it has grown rather than shrunk over the past two years. LVRs are commonly available up to 80% for both commercial purchases and residential refinances, with a small number of lenders going higher for metro securities and lower caps on interest-only terms and regional locations. Liquidity rules range from none at all to around 5% of the loan balance or a set number of months' repayments, and most lenders set a minimum fund balance, commonly $150,000 to $250,000. Several will only lend to a fund with a corporate trustee. Rates sit slightly above equivalent non-SMSF loans. Knowing the panel and each lender's policy quirks is where a broker earns their place.

Nothing about the 2026 changes forces a sale, resets an LVR or creates a compliance problem for an existing residential LRBA. What it does do is close the door on adding another one, which makes the loan you already have worth looking after. Many SMSF residential loans were written years ago at pricing well above today's specialist panel, and refinancing remains permitted. A rate review costs nothing and does not disturb the bare trust.

Separately, the Division 296 tax on total superannuation balances above $3 million applies from 1 July 2026. It sits outside lending entirely, but it changes the maths for some funds weighing up property. Take that conversation to your financial adviser and accountant before deciding anything about borrowing.