SMSF borrowing has two separate hurdles: the arrangement must comply with superannuation law, and the proposed loan must meet a lender’s credit criteria. Calling a loan “commercial” does not establish that the property is legally business real property.
This article was first published on 10 November 2025 alongside the Mary Odisho interview above. The written guidance below has been updated for the rules effective from 10 August 2026. The video is retained as historical material.
Why SMSF Borrowing Needs a Separate Assessment
Under a limited recourse borrowing arrangement (LRBA), the SMSF trustee borrows, a separate holding trust holds the asset, and the fund has the beneficial interest. The structure and asset must meet the relevant superannuation rules.
From 10 August 2026, new LRBAs financing real property generally require business real property. This usually means land and buildings used wholly and exclusively in a business. A commercial label alone is not enough; residential real property can qualify where it meets the legal business-use test. The property must qualify when the LRBA begins and throughout its life. See the ATO’s current LRBA guidance.
Earlier borrowing arrangements and binding acquisition contracts may receive transitional treatment, including certain later refinances or settlements. Significant changes to an earlier contract can matter. Have the dates and documents checked before relying on an exception.
Three Questions Before Applying
- Fund Size and Deposit: What cash is needed for the deposit and transaction costs? Confirm the proposed lender’s current loan-to-value ratio (LVR) limit, valuation basis and other requirements for the specific property and fund.
- Liquidity Buffer: What cash remains after settlement to meet repayments, property expenses and the fund’s other obligations, including periods without rent? Check any lender liquidity requirement for the proposed loan.
- Contributions and Rental Income: Which income will the lender accept, and what evidence is required? Confirm how rent and contributions are assessed rather than assuming that all expected amounts will be counted.
Consider the loan’s fees and ongoing costs as well as the interest rate. ASIC’s Moneysmart guide explains the cash-flow risks, including vacancies or members being unable to continue contributions.
Build Your Expert Team
Before committing, seek advice from a financial adviser authorised to advise on SMSFs about the fund strategy, an appropriately qualified tax adviser about tax, and a solicitor about the trust, contract and legal requirements. A broker’s lending assessment does not replace that advice.
Flexdoc arranges lending for eligible commercial property purchases and refinances through an SMSF. Read how commercial property finance works inside an SMSF or explore our commercial SMSF lending service.
This is general educational information about lending, not financial, tax, legal or superannuation advice. Lending remains subject to the relevant lender’s assessment and approval.
Primary sources checked 19 October 2026. No current lender LVR, rate or product availability is quoted in this update.
Video Source: What is SMSF lending and why is it so popular? (w/ Mary Odisho) by Flexdoc: http://www.youtube.com/watch?v=YXfujmpRB7A