If you have a self-managed super fund (SMSF) or want to switch to one, one way to grow your retirement savings is by investing in property. However, buying property through an SMSF is more complex than taking out a standard investment or home loan, so it’s important to understand how it works before getting started.
What is an SMSF?
An SMSF is a type of superannuation fund managed by its members, known as trustees, who make the decisions about where the money is invested. It’s an alternative to a retail or industry super fund, where your super is managed on your behalf.
It’s become an increasingly popular way to save for retirement. According to the ATO, as of September 2025 there are now over 600,000 SMSFs in Australia.
While you’re generally unable to withdraw funds until retirement, one of the most attractive aspects of an SMSF is the ability to control how and where your money is invested – including in property.
How does an SMSF home loan work?
An SMSF loan to buy property works like a standard home loan in some ways, with terms available up to 30 years, interest charged on repayments and options such as fixed or variable interest rates and interest-only periods.
However, there are key differences.
Rather than taking out a traditional loan, SMSFs must borrow through a limited recourse borrowing arrangement (LRBA). This means the property is held separately from the rest of the fund’s assets, helping protect other SMSF assets if the loan can’t be repaid.
Any property purchased belongs to the SMSF, not to you personally. Likewise, all rental income and any profits from selling the property are paid into the SMSF rather than to you, helping to grow your retirement savings.
These funds are subject to standard superannuation rules and can usually only be accessed once you retire or if you pass away, meaning there are no immediate financial benefits to this arrangement.
How to get an SMSF loan
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Check SMSF eligibility and fund readiness
Ensure your SMSF is properly established and has sufficient funds (including deposit and ongoing costs) to support the property purchase and loan repayments.
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Find a suitable investment property and lender
Look for a property that suits your SMSF’s investment goals and meets investment rules and choose a lender offering SMSF home loans.
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Set up a bare trust
Establish a bare trust to hold the property title on behalf of your SMSF once the purchase is complete.
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Apply for the loan
Submit your loan application with standard documents plus SMSF-specific paperwork like the trust deed and fund financial statements.
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Manage loan repayments
While the bare trust holds the property, your SMSF remains responsible for loan repayments and property management.
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Transfer or sell property after repayment
Once the loan is fully paid off, the property title can be transferred to the SMSF or sold.
What properties can I buy with an SMSF loan?
An SMSF loan can be used to buy residential or commercial property.
In both cases, the property needs to be bought for investment purposes, but rules differ depending on whether it is for domestic or business use:
Residential property
E.g. House, apartments and units
You or any related party cannot live in the property, rent it or buy it from the SMSF. The property must be bought, rented and sold on the open market to unrelated parties only.
Commercial property
E.g. Office, retail and industrial spaces
The property can be leased to a fund member or a related party, including a business you or another member owns. However, the lease must be at market rates and on arm’s length terms, with no discounts or special treatment.
Who are ‘related parties’?
These are people or entities closely associated with the SMSF, including:
- The fund members themselves
- Relatives of fund members (including any spouse’s family members)
- Business partners and their spouses and children
- Employers who contribute to the SMSF, and their relatives and associates
Can I build a property with an SMSF home loan?
No, when borrowing through an LRBA, the loan must be used to buy a single asset, and you cannot change its purpose while the loan is still in place. Borrowed funds can only be used for repairs and maintenance. This means you cannot buy vacant land and then build a property on it separately.
These rules also mean you cannot:
- Demolish an existing building and construct a new one in its place
- Subdivide an existing property
However, the SMSF could use its cash reserves to make more extensive changes to a property.
Who is an SMSF loan suitable for?
While you might have the option to buy property through your SMSF, it’s important to consider whether it’s the right choice for you based on your circumstances.
An SMSF loan could be a good move if you have:
- Enough money in your fund to buy property and cover ongoing expenses (you’ll usually need at least $200,000)
- Enough time before retirement to manage higher costs and repay the loan (typically more than 10–15 years)
- Prior investment experience and the time to actively manage the investment
However, it may not be the best choice if you’re looking for a property to live in personally or want immediate financial benefits, since any returns are locked away until retirement.
SMSF loans are also much more complex than standard property or investment loans, which might be challenging for first-time investors. It’s a good idea to speak with a professional to understand the responsibilities and risks involved before deciding.
What are the costs of an SMSF home loan?
SMSF home loans are typically more expensive than other loans, with a number of extra costs that can add thousands to the overall cost of buying a property and impact your super balance.
Costs include:
- Setting up the SMSF: if you don’t already have an SMSF, you’ll need to establish one before taking out a loan. This involves setup fees plus ongoing administration and compliance expenses.
- Setting up a bare trust: when buying property via an SMSF loan, a bare trust must be created to hold the property title separately until the loan is repaid. Establishing this trust involves legal and setup costs that add to your upfront expenses.
- Interest rates and lender fees: SMSF loans generally have higher interest rates than standard home loans. You’ll also need to factor in lender fees, such as application fees, valuation fees and ongoing loan administration charges.
- Stamp duty: as with any property purchase, stamp duty applies, which varies by state or territory. However, extra care must be taken with an SMSF, as mistakes can create a risk of double stamp duty when the property title is later transferred from the bare trust to the SMSF trustee.
- Accounting and compliance fees: SMSFs are complex and must meet strict reporting and audit requirements each year. This often means paying for professional accounting, tax and audit services.
- Property management costs: if you use a real estate agent to manage the property, their fees will reduce your rental returns.
Do I need a deposit for an SMSF home loan?
Yes, like a standard home loan, SMSF loans require a deposit. The required loan-to-value ratio (LVR) varies depending on the type of property:
- Residential property: at least 20% deposit (up to 80% LVR)
- Commercial property: at least 30% deposit (up to 70% LVR)
The deposit must also be paid entirely from the SMSF’s bank account when borrowing through an LRBA, rather than using personal funds.
This helps ensure the purchase complies with superannuation rules and lender requirements, and that additional stamp duty isn’t charged when the property title is transferred from the holding trustee to the SMSF trustee.
Why apply for a home loan with Savvy
What are the tax implications of an SMSF home loan?
A big draw of buying property through an SMSF are the tax benefits it can offer:
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Concessional tax rates
All contributions to the fund as well as any income generated in the SMSF’s investments, including rental income, are taxed at a flat rate of 15%, regardless of how much you personally earn outside of the SMSF. Once the SMSF transitions to the pension phase, tax on investments typically reduces to zero.
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Reduced capital gains tax (CGT)
If your SMSF sells a property for a profit, it may need to pay CGT. In the first year, capital gains are taxed at 15%. This reduces to 10% after 12 months.
If the property is sold after the SMSF moves into the pension phase, capital gains may be tax-free, provided the fund is paying a retirement income stream and meets ATO requirements.
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Deductible expenses
Various tax deductions can be claimed on the SMSF, such as interest payments, insurance, admin costs and, in some cases, depreciation, helping to reduce the amount of tax the fund needs to pay.
SMSFs and negative gearing
While an SMSF can negatively gear a property, losses can only be offset against income within the fund – not your personal taxable income.
However, if your SMSF is deemed non-complying by the ATO, it will lose its special tax status and be charged at the top marginal tax rate of 45%. It’s therefore vital that the fund stays on top of its compliance requirements, keeps proper documentation and records in order, and makes use of professional support to avoid falling foul of the regulations.
Pros and cons of SMSF home loans
Pros
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Grow your super balance
Rental income and capital growth contribute directly to your SMSF, boosting retirement savings.
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Tax advantages
SMSF earnings are taxed at a lower rate than personal marginal tax rates. Once you retire, investment earnings can be tax-free.
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Increased borrowing power
Combining funds with other SMSF members can give you more capacity to invest in property than your savings alone.
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Protect other SMSF assets
Due to the LRBA setup, if the loan defaults, only the property can be repossessed and any other SMSF assets will remain protected.
Cons
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No immediate personal benefit
You cannot live in SMSF residential property and all income and gains go back into your super, not your own pocket.
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Higher costs
SMSF loans generally carry higher interest rates and fees than standard home loans, which can add significantly to overall costs.
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Limited lender options
Major banks no longer offer SMSF loans. Only specialist lenders and smaller banks provide these, limiting your choices.
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More complex than standard loans
SMSF borrowing involves additional superannuation rules and documentation. Care needs to be taken to meet compliance requirements and avoid penalties.
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No redraw facility
Unlike regular loans, extra repayments can’t be withdrawn later. Once funds go into your SMSF, you can’t access them until retirement.
