Happy Birthday SMSF Lending - you're 18 today!

SMSF lending was implemented on 24 September 2007 and has grown steadily. The value of limited recourse borrowing arrangements within SMSFs has surpassed $72 billion.

It’s official—SMSF lending has hit adulthood. On 24 September 2007, changes to the Superannuation Industry (Supervision) Act 1993 gave trustees of self-managed superannuation funds the green light to borrow for property investment under what’s known as a Limited Recourse Borrowing Arrangement (LRBA). At the time, this was a game-changer. For the first time, Australians could use their super fund to gear into property while keeping the lender’s recourse limited to the specific asset purchased.

Back in 2007, the move was seen as an innovative way to open up investment flexibility in super, especially as residential and commercial property were already highly sought-after assets for retirement portfolios. Fast-forward 18 years, and SMSF lending has become a mainstream option for trustees looking to grow their fund through direct property ownership.

How We Got Here

The original SIS Act didn’t allow borrowing at all, but the 2007 amendments carved out a carefully structured pathway with the LRBA model. The principle was straightforward: allow funds to borrow to acquire assets while protecting members’ retirement savings from undue risk by restricting the lender’s recourse.

Over the years, regulators and governments have fine-tuned the rules. For example:

• 2010 refinements clarified that only single acquirable assets (or collections of identical assets with the same market value, like shares) could be purchased.

• 2012 changes tightened rules around refinancing and improving assets, ensuring borrowed funds couldn’t be used for development or significant alterations.

• 2017–2018 reforms introduced additional reporting requirements, including how LRBA debt interacts with the $1.6m transfer balance cap.

  
  

These tweaks were designed to keep the system robust, protect member balances, and ensure the focus remained on genuine retirement savings.

The Growth of SMSF Lending

From relatively slow uptake in the early years, SMSF lending has grown steadily. The value of limited recourse borrowing arrangements (LRBAs) within SMSFs has surpassed $72 billion. The attraction is clear: borrowing inside an SMSF allows trustees to acquire assets—particularly property—that might otherwise be out of reach. Commercial property, especially business premises purchased through an SMSF, has been a standout use case. Business owners often find it appealing to pay rent to their own super fund rather than an external landlord.

While regulators occasionally raise an eyebrow at the risks of gearing within super, the enduring popularity of SMSF borrowing shows its place in the market is well established. The rules may be strict, but the opportunity remains strong for trustees who understand the benefits and responsibilities.

Why It Still Matters

Eighteen years on, SMSF lending is firmly part of the landscape. It offers:

• Leverage for growth – the ability to magnify retirement savings through property acquisition.

• Control and choice – trustees make the investment decisions, not an external fund manager.

• Tax efficiencies – rental income and capital gains are taxed concessionally inside super.

• Business advantages – the option for business owners to purchase premises within their SMSF.

  
  

Put simply, SMSF borrowing remains one of the most powerful tools for building wealth in super—provided it’s done carefully and with expert guidance.

The Road Ahead

With the sector now a grown-up 18 years old, the future of SMSF lending looks steady, if not without ongoing scrutiny from regulators. The key takeaway for trustees is this: LRBA opportunities still exist, but success depends on structuring things correctly from the outset. That’s where working with experienced advisers and accredited SMSF finance specialists makes all the difference.

Final Word

At Etairos Finance, we’ve been helping trustees navigate the ins and outs of SMSF lending since the early days. We’re accredited, experienced, and passionate about helping clients unlock the benefits of borrowing within super. If you’re curious about how an LRBA could work for your fund—or want to explore your borrowing capacity—talk to us today. After all, 18 years on, SMSF lending is just getting started

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References

• Superannuation Industry (Supervision) Act 1993

• Treasury Laws Amendment (2010 Measures No. 2) Act 2010

• Australian Taxation Office – Self-Managed Super Fund Limited Recourse Borrowing Arrangements

• Australian Prudential Regulation Authority (APRA) SMSF Statistics