Borrowing for property via superannuation

Incorporating a borrowing strategy within self managed superannuation funds (SMSF) to purchase a property has become increasing popular in recent years. However, it is important for SMSF members to undertake sensible and detailed analysis of the true risks involved or they could find themselves in serious trouble with the ATO.

Limited recourse

Members have to follow strict borrowing conditions called a “limited recourse borrowing arrangement” (LRBA) when gearing their super into property.  Under this arrangement, only a single asset can be purchased, such as shares in a single company or a single property (whether that be a residential or commercial property).

Investment strategy

Members considering a geared property investment have to ensure that the investment aligns with their SMSF investment strategy and risk profile.To ignore these risks the fund incurring considerable loss to its members.


Property loans via an SMSF can be more expensive compared to other property loans, primarily due to their limited resource nature.  Furthermore, a custodial or bare trust is required to hold legal title to the property whilst under the LRBA, meaning additional costs for the drafting and establishment of this structure.  Further, it is not uncommon for financial institutions to impose their own costs when examining the fund documents to ensure compliance with their lending criteria.


Since the fund is responsible for making loan repayments, members must ensure that there is contribution and investment income to cover these amounts.  This is even more critical during periods when the property may be without tenants or during breaks in regular contributions.


This is one key area within superannuation where members really need to seek competent advice.  Visiting a specialist, such as a Self Managed Superannuation Fund Specialist Adviser is an ideal start on making sure this strategy does not end in tears!