The reality? It’s far more stable and predictable than most give it credit for.
A big part of the confusion comes down to misunderstanding the numbers. You’ll often hear that the LRBA market sits around $72 billion, but that’s not the lending figure, that’s the total asset value. The actual debt portion is closer to $27 billion. In the context of the broader lending market, that’s relatively small.
Gearing levels have also come back over time, sitting around 38% across the market. So it’s not the high-risk, highly leveraged space some assume it is.
Where People Get Caught Out
The rules themselves aren’t overly complicated, but they are strict.
SMSFs can borrow to purchase an asset, and they can use borrowed funds to maintain or repair it. What they can’t do is improve it. That’s where things get tricky.
For example, replacing a kitchen, even adding something like a dishwasher, can fall under “maintenance” depending on the circumstances. But if you start knocking down walls or changing the structure, that’s clearly an improvement, and you’re outside the rules.
This is also where redraw can become dangerous. Even if a lender allows it, redraw is treated as new borrowing, so it must still meet the same maintenance and repair criteria. Just because it’s available doesn’t mean it should be used.
Refinancing – Big Opportunity, But Be Careful
There’s a genuine opportunity right now in refinancing SMSF loans, especially since most of the major banks exited the space a few years back.
We’re seeing clients sitting on rates that are easily 2–3% higher than what’s available today. In real terms, that can mean tens of thousands in savings each year.
But refinancing isn’t always straightforward.
If the loan was set up before June 2018, it may be grandfathered under the old rules. The moment you refinance and increase the loan—even by a dollar—you can lose that status. That can have flow-on effects to total super balance calculations, so it needs to be handled carefully.
High LVRs Don’t Always Make Sense
Some lenders are now pushing up to 90% LVR in SMSF lending, but that doesn’t automatically mean it’s a good idea.
Super is already a low-tax environment. Chasing high leverage the same way you might outside super doesn’t always stack up, especially when most residential property isn’t strongly positively geared.
If all the income going into the fund is just servicing debt, you’ve got to ask what the strategy actually is.
Offsets & Structure – The Fine Print Matters
Offset accounts are another area where things have evolved.
Traditional offset accounts are less common now, particularly with non-bank lenders. What you’ll often see instead is a sub-account structure, which can raise compliance questions.
If those funds are treated like redraw, then they’re restricted to maintenance and repairs only, the same rules apply. You can’t use that money for anything else.
The ATO has made it clear that trustees and advisers need to properly understand how these are set up before using them.
Getting It Right From Day One
Most issues in SMSF lending don’t come from the loan itself, they come from poor setup.
Things like trust structure, timing, and ownership need to be right from the start. Get it wrong, and you could be dealing with serious issues later, including double stamp duty.
It’s also not a one-person job. Accountants, financial planners, solicitors, and brokers all have a role to play, and none of them can do the full job alone.
Experience Matters More Than Rate
There’s been a wave of new lenders entering the SMSF space, particularly non-banks. But experience levels vary significantly.
This isn’t just about chasing the sharpest rate, it’s about getting deals approved, structured correctly, and settled on time.
A good SMSF lender should be able to work to normal settlement timeframes. If they can’t, it’s usually a sign they don’t fully understand the space.
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