Borrowing in Super

Under certain circumstances it is possible to borrow money for investments within your superannuation fund.  This generally requires having a self managed superannuation fund (SMSF) and the use of a limited recourse borrowing arrangement (LRBA).

What is a limited recourse borrowing arrangement?

A limited recourse borrowing arrangement (LRBA) is a loan arrangement.  With a LRBA in the event of a default, the lender’s recourse is limited to the asset that has been used as security.  So if the secured asset is of less value than the outstanding loan the lender at the time of the default cannot demand the shortfall from the borrower.

Borrowing to purchase Property in a SMSF

If you are considering borrowing money for real estate in superannuation, it is paramount you consider all the issues.  Below is a list of advantages and disadvantages.


  • Principal loan repayments are effectively tax deductible if the superannuation member increases their concessional superannuation contributions within the caps specifically for the purpose of repaying debt
  • Tax effective when property becomes positively geared
  • Minimal or no tax payable if capital gains are realised
  • Asset protection in case of litigation or bankruptcy
  • Obtaining exposure to an asset class that would not otherwise be available to your fund.
  • Total control of your superannuation fund
  • Leveraged wealth creation


  • Higher borrowing costs compared to personal investment loans
  • Higher loan establishment fees to personal investment loans
  • Set up costs of the structure (Self Managed Superannuation Fund)
  • Higher running costs of the structure
  • Property cannot be used for private use unless it is regarded as business real property
  • A deposit of approximately 30% is required

Other Considerations

  • Gearing levels of the property
  • Land tax
  • Stamp duty
  • Non-cash flow rental tax deductions
  • Current superannuation contribution amounts
  • Equity in the investment property cannot be used to fund an additional property
  • Your current and future marginal tax rates
  • Superannuation legislation risk
  • A Self Managed Superannuation Fund can have up to 4 members
  • Funds can be sourced from personal funds

Borrowing to purchase US Property in a SMSF

Firstly from a superannuation legislation perspective a SMSF can purchase overseas property.  However, we are not aware of an Australian bank that will lend to a superannuation fund to purchase an overseas property.  Furthermore for an Australian superannuation fund to purchase a US property it will have to establish a US company.  If established correctly it is possible for a SMSF to purchase a US property.  However, the only way for it to do it with borrowed funds is if the members arrange finance personally and on lend it to their SMSF.

Borrowing to purchase shares in a SMSF

It is also possible for a SMSF to purchase shares with borrowed funds however the banks do not lend on this basis.  The most common way this is achieved is where the SMSF members arrange finance personally and on lend it to their SMSF.

As you can see there are many factors that need consideration.  If you would like to know how these factors apply to you, please contact us.

Humphrey Partners Private Wealth is conveniently located on the outskirts of Brisbane's CBD.

" I am exceptionally happy with the quality of the advice and service that I continue to receive from Chris. I am impressed with his breadth of knowledge and expertise, and his ability to deliver it in a simple to understand manner. Chris is my first financial adviser and he has never given me a reason to look for an alternate. "

Jason Banks - State Manager Home Improvement Retailer