If you’re managing your own Self-Managed Super Fund (SMSF), you’ve taken control of your retirement destiny. You’re making the investment decisions, choosing the assets, and building your financial future on your own terms. For many SMSF trustees, property investment represents a cornerstone strategy for growing their retirement nest egg. But here’s a question that deserves your attention: Are you aware of all the financing options available to your fund?
While most people instinctively think of the big four banks when considering property loans, the SMSF lending landscape has shifted dramatically in recent years. The major banks have largely stepped away from SMSF lending, leaving a vibrant ecosystem of non-bank lenders who’ve stepped up to fill the gap. These specialist lenders aren’t just alternatives—they’re often offering superior products specifically designed for SMSF property investments.
Let me share something I’ve witnessed countless times in my years working with SMSF trustees. A client comes to us having spent months trying to secure an SMSF loan through traditional channels, only to hit roadblock after roadblock. Within days of connecting them with the right non-bank lender, they’re moving forward with competitive rates, flexible terms, and a lender who actually understands the unique requirements of SMSF investing.
Understanding SMSF and Limited Recourse Borrowing Arrangements
Your Self-Managed Super Fund isn’t just another investment vehicle—it’s a powerful tax-advantaged structure that lets you build wealth for retirement while maintaining control over your investment strategy. SMSFs can hold various assets, from shares and managed funds to direct property investments. It’s this last category that opens up significant opportunities through Limited Recourse Borrowing Arrangements, or LRBAs.
An LRBA allows your SMSF to borrow money to acquire a single asset, typically property, while protecting the other assets in your fund. Here’s how it works: Your SMSF establishes a separate trust (called a bare trust or holding trust) that holds the property until the loan is fully repaid. Your SMSF makes the loan repayments from its income and member contributions. Once the loan is paid off, the property transfers from the holding trust into your SMSF proper.
The beauty of this structure lies in the “limited recourse” aspect. If something goes wrong and the loan defaults, the lender can only claim the specific asset purchased with the borrowed funds—not the other assets in your SMSF. This protection makes property investment through your super fund far less risky than it might otherwise be.
💭 Think of it this way: You might have $200,000 in your SMSF. Without borrowing, that limits your property investment options significantly. But with an LRBA, you could potentially purchase a $400,000 property, using your super as a deposit and borrowing the rest. The rental income helps service the loan, and your super fund benefits from both the rental yield and potential capital growth. Over time, as the loan is repaid, your fund owns an appreciating asset that continues contributing to your retirement.
The Rise of Non-Bank Lenders in SMSF Financing
When the major banks retreated from SMSF lending—citing complexity, regulatory concerns, and profitability issues—they left a significant gap in the market. But nature abhors a vacuum, and the non-bank lending sector rushed in with purpose-built solutions for SMSF trustees.
NonBankLenders have become the backbone of SMSF property investment in Australia. These specialized financial institutions focus exclusively on specific lending niches, allowing them to develop deep expertise and tailored products. For SMSFLoans, this specialization translates into lenders who understand the regulatory framework, the compliance requirements, and the unique needs of SMSF trustees.
The advantages of working with non-bank lenders extend far beyond simple availability. First, there’s diversification—not just of your investment portfolio, but of your lending relationships. By accessing credit offerings outside the traditional banking system, you’re not subject to the same policy shifts and appetite changes that affect the big banks. When major banks tighten lending criteria across the board, non-bank lenders often maintain more consistent lending standards.
Second, non-bank lenders typically offer expanded access and greater flexibility. They’re not bound by the rigid credit policies of large banking institutions. A non-bank lender might approve a loan for a property type or in a location that a major bank would automatically decline. They can look at your SMSF’s overall investment strategy and borrowing capacity with more nuance and understanding.
I’ve seen this flexibility make all the difference for clients. One SMSF trustee wanted to purchase a small commercial property to lease back to their business—a perfectly legitimate strategy. After three banks rejected the application citing internal policy restrictions, a non-bank lender approved it within a week, recognizing the solid fundamentals of the arrangement.
Third, non-bank lenders often provide superior customer service and faster turnaround times. Without layers of bureaucracy, they can make decisions quickly and communicate directly with borrowers. When you’re competing in a hot property market, the ability to get loan approval in 1-3 business days rather than several weeks can be the difference between securing your ideal investment property and missing out.
How LRBA Structures Work with Non-Bank Lenders
Understanding the mechanics of an LRBA through a non-bank lender helps demystify the process. The structure itself is dictated by superannuation law, so it remains consistent regardless of your lender choice. However, the terms and flexibility within that structure can vary significantly.
When your SMSF purchases a property using borrowed funds, the lending benefits include the ability to acquire growth assets that would otherwise be beyond your fund’s reach. The property is held in a holding trust separate from your SMSF until the loan is fully repaid. Your SMSF is named as the beneficiary of this trust and has the beneficial interest in the property. This means your fund receives the rental income and benefits from any capital appreciation, even though legal title remains with the holding trust.
The lender’s recourse is limited to the specific asset securing the loan. They cannot pursue other assets within your SMSF or your personal assets (unless you’ve provided a personal guarantee, which we’ll discuss shortly). This limited recourse protection is mandatory under superannuation law and applies regardless of which lender you choose.
However, here’s where non-bank lenders demonstrate their flexibility: personal guarantees. Some non-bank lenders will accept LRBAs without requiring personal guarantees, maintaining the pure limited recourse nature of the arrangement. Others may require guarantees from SMSF members, which does expose your personal assets to some risk if the loan defaults. This is a critical consideration when comparing lenders.
Loan-to-Value Ratios (LVRs) represent another area where non-bank lenders show competitive strength. While the LVR landscape varies by lender and property type, many non-bank lenders offer LVRs up to 80% for residential investment properties held in SMSFs. Some, like Pepper Money and Liberty, have even offered LVRs up to 85% for qualified borrowers with strong fund positions. For commercial properties, LVRs typically range from 60-70%, though this depends on the property’s location, tenant strength, and lease terms.
Let me give you a real example that illustrates these differences. Recently, a client’s SMSF wanted to purchase a $600,000 residential investment property. They had $150,000 available in their fund (25% of the purchase price). A non-bank lender approved an 80% LVR loan without requiring a personal guarantee, allowing the purchase to proceed with the fund maintaining its asset protection. The same client had previously approached a major bank (one of the few still doing SMSF loans) and was offered only a 70% LVR with a mandatory personal guarantee requirement. The non-bank option was clearly superior.
ATO Compliance and Regulatory Framework
The Australian Taxation Office sets clear guidelines for LRBAs, and compliance isn’t optional—it’s essential for maintaining your fund’s favorable tax status. Non-bank lenders who specialize in SMSF lending understand these requirements intimately and structure their loans accordingly.
The single acquirable asset rule is fundamental: each LRBA can be used to acquire only one asset or a collection of identical assets (like a parcel of identical shares). For property, this means one property per loan arrangement. You can have multiple LRBAs within your SMSF, but each must be for a separate, distinct asset.
The loan must be a genuine borrowing with commercial terms. The ATO has established safe harbour rates for interest on LRBAs—currently 8.95% for real property and 10.95% for listed securities. Loans priced within these safe harbour rates are presumed to be at arm’s length and compliant with non-arm’s length income (NALI) provisions. Many non-bank lenders offer rates well below these thresholds, making compliance straightforward. At Aries Financial, for instance, our competitive SMSF loan solutions start from 5.99% PI, providing both excellent value and comfortable compliance margins.
The loan must be secured only against the asset being acquired through the holding trust. The lender cannot have recourse to other SMSF assets, which is the core of the limited recourse requirement. This protection works in your favor, quarantining risk to the specific investment rather than exposing your entire fund.
Your SMSF must have the right to acquire legal ownership of the asset by making additional payments beyond the loan repayments—essentially, the right to pay off the loan early without penalty. Most non-bank lenders structure their SMSF loans with this flexibility built in.
📋 Documentation is crucial. You need a written loan agreement that clearly sets out the terms and conditions. The holding trust must be properly established with a trust deed. Your SMSF’s investment strategy should explicitly document the decision to use borrowing and how it fits with your fund’s objectives. Non-bank lenders who specialize in SMSF lending typically provide templates and guidance to ensure all documentation meets ATO standards.
One compliance area that sometimes catches trustees off-guard involves offset accounts. The ATO has clarified that genuine offset accounts from Authorized Deposit-taking Institutions (ADIs) are permitted under LRBAs, but offset-style arrangements from non-ADI lenders require careful review. When evaluating non-bank lenders, it’s worth asking about their offset account offerings and ensuring they’re structured to be ATO-compliant.
What Non-Bank Lenders Are Offering
The diversity of products in the non-bank SMSF lending space might surprise you. Let’s look at what some leading lenders are bringing to the table.
Pepper Money has established itself as a major player in SMSF lending, offering residential investment property loans with LVRs up to 80% and, in some cases, 85% for well-qualified borrowers. They’ve developed streamlined application processes specifically for SMSF trustees and accept a wide range of property types and locations. Their interest rates are competitive, typically starting in the 6-7% range for variable loans. Pepper Money also offers interest-only loan options, which can be attractive for SMSF investors looking to maximize cash flow during the accumulation phase.
Liberty Financial brings particular strength to commercial property SMSF lending. They’ll consider LVRs up to 70% for commercial properties with strong tenant covenants and long lease terms. Liberty has built a reputation for looking at deals the major banks reject, applying common-sense credit assessment rather than rigid policy overlays. They’re also known for faster approval times—often providing indicative approval within 24-48 hours for straightforward applications.
Resimac offers comprehensive SMSF lending solutions across both residential and commercial properties. They’ve developed specialized products that include features like progress payment facilities for purchasing properties under construction, and combined residential and commercial loan packages for SMSFs building diversified property portfolios. Resimac’s servicing buffers—the additional income required above the loan repayment amount—tend to be more reasonable than some competitors, making it easier for SMSFs to demonstrate borrowing capacity.
AMP (through their banking division) continues to support SMSF lending even as some other traditional institutions have retreated. They offer the advantage of being an established name with robust systems, while maintaining competitive rates and terms. AMP’s maximum LVRs typically reach 80% for residential properties, with loan amounts up to $5 million for qualified borrowers.
Beyond these major names, numerous smaller specialist lenders serve specific niches within the SMSF market. Some focus exclusively on commercial properties, others specialize in regional and rural properties that the larger lenders might overlook. This diversity means there’s almost always a lending solution available, even for unconventional property investments.
When comparing these lenders, three factors consistently matter most: the interest rate (obviously), the LVR offered (which determines how much deposit your SMSF needs), and the servicing buffer (which affects whether your fund qualifies for the loan amount you need). The servicing buffer is the lender’s assessment rate—they stress-test your ability to repay the loan by calculating repayments at a higher interest rate than the actual loan rate, typically 2-3% higher. Lenders with lower buffers make it easier to qualify for larger loans.
Practical Considerations When Choosing Non-Bank Lenders
Making the right choice among non-bank SMSF lenders requires careful evaluation of several factors beyond just the interest rate. While a low rate matters, it’s not the whole story.
Start with the fees. SMSF loans typically involve establishment fees, valuation fees, legal fees for the holding trust setup, and ongoing annual fees. These can range from a few hundred dollars to several thousand, depending on the lender and loan size. Some lenders charge higher upfront fees but lower interest rates; others reverse that equation. ⚠️ Calculate the total cost over the loan term, not just the headline rate.
Compare the LVRs available from different lenders for your specific property type. A lender offering 80% LVR for residential properties might only lend at 60% LVR for the commercial property you’re considering. Make sure you’re comparing apples to apples.
The servicing buffer becomes crucial if your SMSF’s income is marginal for the loan size you need. Lender A might assess your loan at 8.5%, while Lender B uses 7.5%. That one percentage point difference could determine whether you qualify for the loan. Non-bank lenders sometimes have more flexibility in how they calculate servicing, potentially considering rental income from existing properties in your SMSF or the rental income from the property being purchased.
Due diligence on the lender itself matters too. How long have they been operating in the SMSF space? What’s their reputation among mortgage brokers and financial advisors? Are they financially stable and likely to be around for the 15-30 year term of your loan? While non-bank lenders are regulated and must meet prudential standards, they do vary in size, experience, and market position.
Consider the loan features that matter for your strategy. Will you want to make extra repayments to pay off the loan faster? Check whether the lender charges penalties for additional repayments. Do you want interest-only payments initially to maximize your SMSF’s cash flow? Not all lenders offer interest-only options for SMSF loans. Do you need a flexible loan that allows you to redraw extra payments if your fund needs liquidity? These features vary significantly across lenders.
The application and approval process deserves attention too. Some non-bank lenders have fully digitized application systems that make the process smooth and fast. Others still rely on paper-based systems that can be cumbersome. If you’re purchasing in a competitive market where speed matters, a lender who can provide approval within 1-3 business days has real value beyond just convenience.
One often-overlooked consideration is the lender’s communication and service quality. You might be dealing with this lender for many years. Are they responsive? Do they explain things clearly? Can you reach a real person when you need help? SMSFs have ongoing compliance requirements, and having a lender who understands those requirements and can provide guidance makes your life easier.
At Aries Financial, we’ve built our reputation on exactly this kind of specialized service—deep SMSF lending expertise combined with a commitment to fast approvals and transparent communication. We understand that your SMSF loan isn’t just a financial transaction; it’s a critical component of your retirement strategy, and it deserves to be treated with integrity and care.
A Step-by-Step Guide to Exploring Non-Bank SMSF Lending
Ready to explore what non-bank lenders can offer your SMSF? Here’s a practical roadmap to follow.
Step 1: Review Your SMSF’s Investment Strategy
Before approaching any lender, ensure your SMSF’s investment strategy explicitly allows for property investment and borrowing. The trustees should have documented the rationale for property investment, how it aligns with members’ retirement goals, and the risk management approach. This documentation is legally required and will be requested by lenders.
Step 2: Assess Your Fund’s Borrowing Capacity
Calculate how much your SMSF can realistically borrow. Consider your fund’s current balance, ongoing contribution capacity, existing income (from employment or other investments), and the expected rental income from the property you’re considering. 💡 A rough rule of thumb: your SMSF typically needs ongoing contributions or income sufficient to cover the loan repayments at the lender’s assessment rate, which might be 2-3% higher than the actual interest rate.
Step 3: Define Your Property Investment Criteria
What type of property are you targeting? Residential or commercial? What location? What price range? Different non-bank lenders have different appetites for various property types and locations. Being clear on your criteria helps narrow down which lenders to approach.
Step 4: Research and Compare Lenders
Start comparing non-bank lenders based on the factors we discussed: interest rates, LVRs, fees, servicing buffers, and loan features. Don’t rely solely on advertised rates—these often come with conditions or apply only to ideal scenarios. Look for lenders who specialize in SMSF lending and have a strong track record in the space.
Step 5: Engage a Specialist SMSF Mortgage Broker
This step can save you enormous time and potentially money. A broker who specializes in SMSF lending has relationships with multiple non-bank lenders and understands their different criteria and appetites. They can quickly identify which lenders are most likely to approve your application and offer the best terms for your specific situation. They’ll also handle much of the application paperwork and liaise with the lender on your behalf.
Step 6: Arrange Pre-Approval
Before you start seriously property shopping, get pre-approval from your chosen lender. This gives you certainty about your borrowing capacity and makes you a more attractive buyer when you find the right property. Pre-approval also helps you move quickly when opportunities arise, crucial in competitive markets.
Step 7: Consult with Your Financial Advisor and Accountant
Your financial advisor should review how the proposed property investment fits with your overall retirement strategy. Your accountant needs to ensure the LRBA structure is set up correctly for tax and compliance purposes. These professionals working together with your mortgage broker creates a coordinated approach that protects your interests.
Step 8: Establish the Holding Trust Structure
Once you’ve found a property and secured formal loan approval, you’ll need to establish the holding trust (bare trust) that will hold the property until the loan is repaid. Your lender may provide template trust deeds, or your solicitor can prepare them. This must be completed before settlement.
Step 9: Complete the Purchase and Settlement
The settlement process for an SMSF property purchase is similar to a standard property purchase, but with additional parties involved. The holding trust purchases the property, with funds coming from your SMSF’s contribution (the deposit) and the loan from the non-bank lender. Your solicitor or conveyancer will coordinate with all parties to ensure the transaction completes correctly.
Step 10: Maintain Ongoing Compliance
After settlement, ensure your SMSF meets all ongoing compliance requirements. The property should be included in your SMSF’s asset register, the loan must be recorded in your fund’s financial statements, and all documentation should be maintained. Your SMSF’s auditor will review the LRBA arrangement as part of the annual audit process.
Maximizing Your SMSF’s Investment Potential
The strategic advantages of using non-bank lenders for SMSF property investment extend well beyond simple access to credit. By working with specialized lenders who understand the SMSF landscape, you’re positioning your fund to take full advantage of property investment opportunities that build long-term wealth.
Think about the compounding effect over time. A well-chosen property purchased through your SMSF using a non-bank loan could generate rental income that helps service the loan while also appreciating in value. Over 10, 15, or 20 years, that property becomes a fully owned asset within your SMSF, potentially worth significantly more than the purchase price. The rental income it generates during retirement becomes tax-free income to support your lifestyle. That’s the power of leveraging your super effectively.
But this power comes with responsibility. Property investment through an SMSF isn’t suitable for everyone, and borrowing amplifies both gains and risks. The discipline to maintain loan repayments, the knowledge to remain compliant with super laws, and the wisdom to choose sound investments all matter enormously.
This is where working with the right partners makes all the difference. A non-bank lender who specializes in SMSF lending brings expertise that protects you from compliance pitfalls while providing access to competitive lending products. A skilled mortgage broker familiar with the SMSF space saves you time and opens doors to lenders you might not discover on your own. A competent financial advisor ensures your property investment strategy aligns with your broader retirement goals.
At Aries Financial Pty Ltd, we’ve built our entire practice around empowering SMSF trustees to make informed decisions and access superior lending solutions. Our philosophy has always centered on three core principles: integrity in everything we do, expertise developed through specialization, and empowerment of our clients through education and guidance.
We believe that SMSF trustees deserve more than just a loan—they deserve a lending partner who understands their unique needs, respects the regulations governing their fund, and commits to their long-term success. That’s why we’ve positioned ourselves as Australia’s trusted SMSF lending specialist, focusing exclusively on this niche to develop unmatched expertise.
When you work with a non-bank lender who truly understands SMSFs, you’re not just getting financing—you’re getting a strategic advantage. competitive rates, flexible terms, and fast approvals that make property investment through your super fund not just possible, but practical and profitable.
Your SMSF represents years of hard work and disciplined saving. It deserves a financing solution that matches its importance. Don’t settle for limited options or one-size-fits-all products designed for traditional owner-occupier mortgages. Explore what specialized non-bank lenders can offer, and discover why so many SMSF trustees are finding better loan options outside the traditional banking system.
The opportunity to build significant wealth through property investment in your SMSF is real, but only if you have access to the right financing tools. Non-bank lenders have stepped up to provide those tools, offering diversification, flexibility, and expertise that the major banks no longer deliver in the SMSF space.
Your retirement deserves nothing less than the best financing solutions available. Isn’t it time you explored whether your SMSF is missing out on better loan options?
