SMSF Property & LRBAs
Property in an SMSF can get complicated. We know the territory.
Property can be held within an SMSF in a number of ways, but the accounting, tax and compliance requirements can become complex quickly. Whether your SMSF owns property directly, has an existing limited recourse borrowing arrangement (LRBA), or is considering a more complex property structure, our experienced SMSF team can help with the accounting, taxation and compliance implications. The important thing is to get the structure looked at before you proceed.
Property in an SMSF
Subject to superannuation law, an SMSF may be able to invest in different types of property, including:
- Residential property
- Commercial property
- Vacant land
- Units in certain property trusts
How the property is owned matters. So does how it is funded, who is involved and how the property will be used. There can also be additional rules where members, family, related businesses or other related parties are involved.
Property & LRBAs
Borrowing adds another layer of complexity. SMSFs are generally prohibited from borrowing, subject to limited exceptions. One of those exceptions is a complying limited recourse borrowing arrangement, commonly known as an LRBA. An LRBA involves specific structural, documentation and ongoing compliance requirements, so it is important that the arrangement is properly considered before contracts are entered into or funds are committed. Our team has experience with the establishment and ongoing administration of SMSFs with LRBAs, including:
- LRBA establishment
- Bare trust structures
- Property accounting and administration
- LRBA compliance monitoring
- Loan and repayment accounting
- Property valuations and reporting
- Ongoing SMSF compliance
From 10 August 2026, an SMSF entering into a new LRBA to acquire real property can only use that borrowing to acquire business real property. This does not mean an SMSF can no longer purchase residential investment property using its own funds. It means a new LRBA generally cannot be used to acquire ordinary residential investment property that does not meet the business real property requirements. Transitional provisions apply to certain existing arrangements and contracts entered into before the change.
The rules around borrowing have changed
Commercial property
Commercial property can raise different considerations. Property that meets the definition of business real property may, in certain circumstances, be acquired by an SMSF from a related party and may also be leased to a related business. But simply calling a property “commercial” does not necessarily mean it meets the business real property requirements. The actual use of the property and the structure of the transaction matter.
Property trusts and other structures.
An SMSF doesn’t necessarily have to own property directly. In some circumstances, an SMSF may hold units in a trust that owns property. These arrangements can become particularly complex where related parties, borrowing or related trusts are involved. Issues can include:
- Who controls the trust
- Who the other investors are
- Whether parties are related
- Borrowing within the trust
- How the property is used
- In-house asset rules
- Arm’s-length requirements
- Valuation of the investment
The structure should be considered before the SMSF transfers money or acquires units.
If you’re considering a property transaction involving your SMSF, it can be much easier to identify and address accounting, tax or compliance issues before contracts are signed, money is transferred or a structure is established. We can review the proposed structure from an SMSF accounting, taxation and compliance perspective, identify issues that may need attention and work alongside your lawyer, financial adviser or other professionals where required.
Thinking about a property transaction?
Talk to us before you sign.
Already have property in your SMSF?
We also provide ongoing accounting and administration for SMSFs holding direct property and existing LRBAs. Our team can take care of the annual accounting, administration and compliance requirements and help you understand what records and information we need from you.
Important: Freedom Financial Partners provides SMSF accounting, taxation, administration and compliance services. We do not provide financial product advice. The information on this page is general information only and should not be relied upon as a recommendation to acquire, dispose of or hold property or any other investment. We can help you understand the accounting, taxation and SMSF compliance implications of a proposed structure. We cannot advise whether a particular property or investment is appropriate for you or your retirement objectives. Where required, you should obtain advice from a suitably licensed financial adviser and/or appropriately qualified legal adviser.
Whether you’re looking to set up an SMSF, transfer an existing fund or find a team to manage the ongoing work, we’d be happy to talk.