Self-Managed Super Fund (SMSF) borrowing arrangement (LRBA)

We will help your SMSF use a borrowing arrangement to acquire property or other permitted assets within the rules.

An LRBA allows your SMSF to borrow to acquire a single asset (most commonly property) and is one of the most powerful tools available for building wealth inside super. But the structure is tightly regulated, and the ATO looks closely at LRBA arrangements for compliance failures. The bare trust must be set up correctly, the loan must be on commercial terms, and any related party involvement must meet the safe harbour conditions precisely. We structure your LRBA so the deal proceeds and the fund stays compliant.

What is an SMSF borrowing arrangement (LRBA) and why does it matter?

A Limited Recourse Borrowing Arrangement (LRBA) allows an SMSF to borrow funds to acquire a single asset, which is held in a bare trust for the fund until the loan is fully repaid. This structure is most commonly used to purchase property, giving SMSF trustees the ability to acquire higher-value assets than their current super balance would otherwise allow, while limiting the lender’s recourse to the single asset in the event of default.

Can my SMSF borrow to buy residential property?

Yes, an SMSF can borrow to purchase residential investment property through an LRBA, provided the property meets the fund’s investment strategy and the arrangement complies with the superannuation rules. The property cannot be acquired from a related party, and it cannot be used by a fund member or their relatives.

What is a bare trust and why is it required for an LRBA?

The bare trust holds the asset on behalf of the SMSF trustee until the loan is repaid in full. This structure means the lender’s recourse is limited to the asset in the bare trust, not the other assets of the fund. Once the loan is repaid, the asset is transferred into the SMSF.

Can an SMSF borrow from a related party?

Yes, subject to strict conditions. Related party loans must be on commercial terms as if the transaction were with an arm’s length party. The ATO has published safe harbour interest rates and terms that must be met. We advise on the specific requirements for related party LRBA arrangements.

What types of assets can an SMSF acquire through an LRBA?

LRBAs can be used to acquire real property (residential or commercial), listed securities, and other permitted assets. The asset must be a single acquirable asset, and the fund cannot improve the asset while it is held in the bare trust. Business real property can be acquired from related parties, subject to conditions.

Your LRBA is structured correctly with compliant documentation from the outset.

Your fund can acquire higher-value assets without putting your compliance position at risk.

Your related party lending arrangement meets ATO safe harbour requirements.

Is an LRBA the right structure for your SMSF investment?

Before committing to a property purchase through super, it is important to confirm the structure is compliant. Let us help you understand exactly what is required.

An LRBA set up incorrectly can cost your fund more than the asset is worth.

You want your SMSF to acquire a property or other permitted asset using a borrowing arrangement, but the legal requirements for LRBAs are specific and technical, and a structure that fails to comply can result in the arrangement being unwound, at significant cost to the fund and to the underlying investment.

We will advise on whether the proposed acquisition can be structured as a compliant LRBA.
We will prepare the bare trust deed and all LRBA documentation.
We will review the loan terms for compliance with ATO requirements.
We will advise on related party lending requirements and safe harbour conditions.
We will support you through settlement and post-acquisition compliance.

Growing your super through property without the full purchase price.

Your SMSF has accumulated a strong balance and you have identified a property you want the fund to acquire. The purchase price is above what the fund can pay outright, and an LRBA is the most obvious path forward. You may be considering borrowing from a bank, from a related party, or both. You know that LRBAs require a bare trust structure, that related party loans must meet the ATO’s safe harbour conditions, and that the whole arrangement needs to be properly documented, but you are not certain of exactly what each of those things requires in practice.

What's included in your SMSF LRBA service

Bare trust deed preparation.
LRBA loan documentation review or preparation.
Advice on related party lending requirements.
Review of investment strategy for LRBA compliance.
Documentation for asset acquisition.
ATO compliance advice and safe harbour guidance.

What happens when an LRBA does not meet the rules?

LRBA failures are among the most costly mistakes an SMSF trustee can make. A bare trust that is incorrectly documented, a loan that is not on arm’s length terms, or an asset that does not qualify as a single acquirable asset can each cause the arrangement to fail the LRBA rules. Once the ATO identifies a non-compliant LRBA, the trustee faces a direction to unwind it — which means selling the asset, often at the worst possible time and under pressure. Related party LRBA arrangements that do not meet the safe harbour conditions on interest rate and loan terms are a perennial audit target. The gap between an LRBA that works and one that does not is entirely in the documentation.

Here is how we structure your LRBA correctly.

We assess the proposed acquisition against the LRBA requirements before a cent is committed. We prepare the bare trust deed and all associated documentation, review or draft the loan agreement against the ATO’s safe harbour conditions, and advise on any related party issues that need to be addressed. We coordinate with the lender and your accountant to ensure the entire arrangement is executed correctly from day one. By the time the asset settles, the fund’s compliance position is fully documented and defensible.

Our SMSF LRBA setup process

Three steps to your compliant LRBA in place.

Assess and advise

We review the proposed acquisition, the loan structure, and any related party issues to confirm the LRBA can be structured compliantly for your fund.

Prepare documentation

We prepare the bare trust deed, review or draft the loan agreement, and ensure all documentation meets the ATO requirements for a compliant LRBA.

Execute and settle

We coordinate the execution of all documents and advise on the settlement process, ensuring the asset is correctly acquired into the bare trust structure.

Experienced SMSF lawyers ready to guide you.

We understand that LRBA transactions feel straightforward on the surface, you find the property, the SMSF borrows to buy it, but the compliance requirements are exacting. Our lawyers have structured LRBAs for SMSFs across a wide range of asset classes and borrowing arrangements, including related party loans, and we know how to meet the ATO’s requirements without slowing down your deal. We work to your timeline.

We understand you want to know the cost, before we get started.

We will map out our process, from beginning to end, so you know what the journey will look like before you get started.

We will provide you with a clear and detailed Work Proposal covering each step along the way.

Our fair fees are all-inclusive. No hidden costs for telephone calls, emails, photocopying, couriers, or coffee.

Our great lawyer guarantee

We want to be part of your team over the long term. We achieve this by adhering to these core principles:

Take the time

We listen carefully to understand what you want to achieve. Then we thoroughly explain our advice and step you through the documents. You can be sure you know the full consequences.

Share our knowledge

We will pass on as much knowledge as we can, so you can make your own informed decisions. We want to make you truly independent.

Stick to our knitting

We only do what we're good at. You can be confident that we know what we're doing and don't pass on the cost of our learning.

Work as one team

Someone will always be available to answer your questions, or point you in the right direction. You will also benefit from a range of perspectives and experience.

Fair pricing

For advice and documents, we provide a fixed or capped quote so you don't take price risk. If you're in a dispute, we map out the process and costs so you know what to expect.

It's your show

We're not in this for our egos. We're in it for a front row seat to witness your success.

Ready to set up your SMSF LRBA?

Book a call today and we will assess whether the proposed acquisition can be structured as a compliant LRBA and take you through exactly what is involved.

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