Simple hacks to buy an apartment using your super

The Australian Government banned new Limited Recourse Borrowing Arrangements for residential property on 23 June 2026.

If you signed a contract before mid-August 2026, your arrangement is grandfathered and retains the concessional tax treatment that made these structures attractive. If you did not, you can no longer use your Self-Managed Super Fund to borrow for a residential apartment. The window has closed, and the opportunity now exists only for commercial property or for those who acted before the ban took effect.

This article is written for Hills District trustees who entered into a residential LRBA before the ban, or who are now considering commercial property as an alternative. It explains how the structure works, what compliance obligations apply, and where the recent regulatory changes leave you.

What a Limited Recourse Borrowing Arrangement Actually Means

A Limited Recourse Borrowing Arrangement allows your SMSF to borrow money to buy a single property, held in a bare trust, with the lender's recourse limited to that property alone.

The SMSF borrows from a specialist lender, the property title sits in a bare trust until the loan is repaid, and if the fund defaults, the lender can only claim the property itself, not other assets in the fund. The arrangement must comply with the sole purpose test, meaning the property exists purely to generate retirement benefits for members. Personal use is not permitted. Each loan covers one property in one bare trust, so if your fund holds two apartments, you need two separate arrangements.

Consider a trustee who used their SMSF to purchase a two-bedroom apartment in Castle Hill before the ban. The fund borrowed at 80% LVR through a non-bank lender, the property was placed in a bare trust, and rental income now flows back into the fund at 15% tax in accumulation phase. The loan structure means the lender cannot touch the fund's share portfolio or cash reserves if something goes wrong. The trustee completed certified training covering LRBAs and related-party transactions, maintained a cash buffer of around 8% of the asset value for unforeseen costs, and ensured the property met the sole purpose test from day one.

Grandfathered Properties and What That Status Protects

Existing residential LRBA arrangements entered into before the ban are fully grandfathered and retain concessional tax treatment.

Rental income is taxed at 15% in accumulation phase, and capital gains attract an effective 10% rate due to the one-third discount. The property continues to be held in the bare trust structure, and the SMSF can refinance the loan without losing grandfathered status, provided the refinance does not create a new LRBA under ATO interpretation. The ban applies prospectively, meaning contracts signed before the legislation received royal assent are protected. Settlement date does not matter. Contract date is the relevant trigger.

If your fund acquired a residential apartment in Baulkham Hills or Kellyville in the months leading up to the ban, and the contract was signed before mid-August, the arrangement is protected. You retain access to the same tax concessions, the same refinancing options, and the same compliance framework that applied before the ban. However, you cannot use the LRBA to fund structural improvements while the loan is outstanding. Repairs and maintenance are permitted, but adding a granny flat or reconfiguring internal walls is not. The single acquirable asset rule means the property you bought is the property the lender can claim, and nothing about that asset can fundamentally change until the loan is repaid.

SMSF Loan Deposit Requirements and Cash Buffers

Non-bank and specialist lenders were offering LVRs up to 80% for residential property before the ban, and continue to do so for commercial property.

For residential apartments acquired before mid-August 2026, a 20% deposit was often sufficient, though lenders required the SMSF to demonstrate liquidity beyond the deposit itself. Post-settlement cash buffers of 5% to 10% of the asset value are now standard, used to cover vacancies, repairs, strata levies, and compliance costs without forcing a distressed sale. The fund must hold enough liquid assets to meet these obligations and maintain the integrity of the LRBA structure. Lenders scrutinise this more closely than they did in earlier years, particularly for funds with limited member contributions or low rental yields.

If your SMSF purchased an apartment in Norwest or Rouse Hill with a 20% deposit, the lender would have required evidence of additional cash reserves at settlement, often held in the fund's transaction account or term deposit. These reserves are not optional. Without them, the lender may decline the application or require a higher deposit to offset liquidity risk.

Refinancing an Existing SMSF Residential Loan

An SMSF can refinance an existing LRBA, and grandfathered residential properties retain their status through refinancing.

The refinance must comply with the original borrowing structure and cannot alter the single acquirable asset. The bare trust remains in place, the property does not change hands, and lender-to-lender stamp duty is generally avoided because legal title does not move. For the 2025-26 financial year, the safe harbour interest rate for related-party LRBAs is 8.95%, down from 9.35% the previous year. If your fund borrowed from a related party, the loan terms must reflect arm's length conditions, and refinancing through an external lender can remove that compliance burden.

Whether a refinance of a grandfathered residential LRBA is treated as a new LRBA is not yet settled by the ATO. Trustees should not restructure unnecessarily until specific legal advice has been obtained, as acting without clarity could inadvertently breach the new rules and put the fund's grandfathered status at risk. For funds holding apartments in the Hills District, refinancing to a lower rate or better terms remains available, but the process requires careful documentation and lender familiarity with SMSF structures.

Compliance Obligations and Trustee Training Requirements

Trustees, both new and existing, must complete certified training covering LRBAs, related-party transactions, cash flow planning, and compliance obligations.

Non-compliance may result in penalties of up to $19,800, or even fund disqualification. SMSFs with borrowing arrangements face heightened data-matching and transaction-monitoring from the ATO, and trustees must ensure rigorous record-keeping at every stage. Each transaction, contribution, rental payment, and expense must be documented and reconciled. The training requirement applies regardless of whether your LRBA was established before or after the ban, and it is not a one-off obligation. Ongoing education ensures trustees understand their duties under superannuation law and avoid inadvertent breaches that could jeopardise the fund's complying status.

For trustees in the Hills District who established an SMSF to acquire residential property, this training is mandatory. It covers how to manage cash flow when rental income falls short, how to structure related-party transactions without triggering in-house asset rules, and how to respond to ATO audit activity. The cost of non-compliance far exceeds the time required to complete the training, and lenders may request evidence of completion before approving a loan or refinance.

Commercial Property as the Remaining Option for New LRBAs

Commercial property LRBAs are unaffected by the 23 June 2026 ban and remain available for SMSFs.

Non-bank and specialist lenders are offering LVRs between 65% and 75% depending on the asset class, such as industrial versus retail. The property must be used wholly and exclusively in a business, and it must meet the sole purpose test. If the property is leased to a related party, it may fall within the 5% in-house asset limit unless an exception applies. The same bare trust structure applies, the same cash buffer requirements apply, and the same trustee training obligations apply. The key difference is that commercial property remains an option for new borrowing, while residential property does not.

For Hills District trustees exploring commercial property, the decision requires careful assessment of rental yields, tenant quality, and asset liquidity. SMSF loans for commercial property are more complex than residential, and lender appetite varies depending on location, tenancy strength, and lease terms. A small office in Norwest Business Park with a long-term tenant may attract better lending terms than a retail shopfront in a secondary location with vacancy risk.

How CFC Finance Supports SMSF Trustees in the Hills District

SMSF lending requires a broker who understands the legal structure, the compliance environment, and the lender panel willing to fund these arrangements.

CFC Finance works with Hills District trustees who hold grandfathered residential LRBAs and those exploring commercial property as an alternative. We connect you with specialist lenders, help you meet liquidity and training requirements, and ensure your loan structure complies with ATO expectations. Whether you are refinancing an existing apartment loan or assessing a commercial property opportunity, the process benefits from guidance anchored in both finance and compliance.

Call one of our team or book an appointment at a time that works for you.

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