SMFS Loan

A Self-Managed Superannuation Fund (SMSF) can be a powerful way to build wealth for retirement. However, setting up an SMSF and borrowing through it is a major financial decision that requires careful planning, time and the right advice. Before moving forward, it’s essential to consult with experts your accountant, financial adviser and an experienced mortgage broker.

At Oracle Ezy Finance, we help you understand the rules, structure and borrowing process for SMSF loans so you can invest confidently

Why set up an SMSF Loan?

More Australians are choosing to manage their own super and use their SMSF to invest in property. Done correctly, this strategy can provide long-term retirement benefits for members and their dependants. However, strict rules apply and compliance is critical

SMSF Property Rules

When buying property through an SMSF, the investment must comply with the law. The property:

Must only provide retirement benefits to SMSF members
Cannot be purchased from a related party of any member
Cannot be lived in by a fund member or their related parties
If it’s a commercial property, it can be leased to a fund member’s business but only at market rates and under strict conditions

Borrowing capacity for SMSF Loans

Unlike standard home loans, SMSF borrowing capacity is assessed differently. Lenders usually look at:

Employer contributions and voluntary member contributions (typically over the past 2 years)
Rental income or expected rental income from the property
SMSF income and expenses over time

Most lenders require:

At least 20% deposit (plus costs like stamp duty)
Higher interest rates compared to standard investment loans
Supporting documents such as:
- 6 months of SMSF bank statements
- 2 years of super statements (for new SMSFs)
- Rental income evidence or a property appraisal
- Certified copies of the SMSF trust deed and property deed

Some lenders also require independent legal or financial advice before approving an SMSF loan

How does an SMSF Loan work?

An SMSF loan operates under a limited recourse borrowing arrangement (LRBA). This means:

The lender’s security is restricted to the property being purchased (they cannot access other SMSF assets in case of default)
A bare trust is usually set up to hold the property on behalf of the SMSF until the loan is repaid
Rental income is deposited into the SMSF account, and loan repayments are made from the same account
Each property purchased by the SMSF requires its own separate bare trust
Once the loan is fully repaid, ownership of the property transfers to the SMSF

Key restrictions to know

No equity release: You cannot withdraw equity from an SMSF property to fund another purchase
Repairs vs improvements: You can carry out normal maintenance and repairs but cannot make major improvements (e.g., extensions or structural renovations)

Is an SMSF Loan right for you?

An SMSF loan can be a smart investment strategy but it isn’t right for everyone. The rules are strict, the setup is complex and interest rates are higher than standard loans. That’s why getting the right advice is crucial.

Book a consultation with Oracle Ezy Finance today

Oracle Ezy Finance is your trusted mortgage broker in Epping and nearby suburbs helping individuals, families and businesses secure the right home loans, investment loans, commercial finance and personal loans with ease. We make lending simple, transparent and stress-free