SMSF loans

If you’re considering taking out a home loan to buy property as part of your self-managed super fund (SMSF), you can learn about some of the options with Canstar.

Joshua Sale

Group Manager, Research & Ratings

Nina Rinella

Editor-in-Chief

Latest in

Latest

Self-managed super fund rules

There are complex rules you need to follow if you want to keep your SMSF compliant. Here’s an overview of what they are, with insights by an expert.

Brent Jones1 December

Should your SMSF invest in a collection? The pros and cons of collectables

Michael Lund5 October

Explainer: Is it possible to invest in bitcoin through your super?

Ellie McLachlan30 January

View all in

What is a self-managed super fund (SMSF) loan?

A self-managed super fund (SMSF) loan is a home loan used by an SMSF to buy an investment property. Any returns on the investment – whether that’s rental income or capital gains – are funnelled back into the super fund to help increase the fund’s retirement savings.

The federal government’s Moneysmart website says a property cannot be acquired from, lived in or rented out to a fund member or any of their related parties.

One exception is if the property is a commercial premise in which case it can be leased to a fund member for their business but it must be at the market rate.

Investing in property within an SMSF must be in the best interests of fund members and in accordance with the laws around SMSF borrowing.

How does an SMSF loan work?

There are strict rules that apply to an SMSF borrowing money for property and not all banks or lenders offer such a service, so your choice may be limited compared to someone buying a home to live in or an investment property outside of an SMSF.

Moneysmart says you may find that SMSF property loans tend to be more costly than other property loans. You also need to be mindful of any fees and charges involved with the purchase of any property, which it says could reduce any amount earned going to your SMSF.

There may also be tax implications on any earnings from the property, either from rent or sale of the property, so you may be wise to seek some independent professional advice before making any decision.

Moneysmart adds that anyone who gives advice on an SMSF must have an Australian financial services (AFS) licence.

However, in terms of the features and mechanics of the product, SMSF loans are similar in many respects to conventional home loans. For example, they can come with a fixed or variable interest rate, a loan term that’s typically 30 years, and in some cases the option to make interest-only repayments for part of the loan term.

You can use Canstar’s comparison table above to check out what rates, features and fees are available from some SMSF loan providers.

Important information

For those that love the detail

This advice is general and has not taken into account your objectives, financial situation or needs. Consider whether this advice is right for you.

Any advice on this page is general and has not taken into account your objectives, financial situation or needs. Consider whether this general financial advice is right for your personal circumstances. You may need financial advice from a qualified adviser. Canstar is not providing a recommendation for your individual circumstances. It’s important you check product information directly with the provider. Consider the Product Disclosure Statement and Target Market Determination (TMD), before making a purchase decision. Contact the product issuer directly for a copy of the TMD. For more information, read our Detailed Disclosure.

What is a Target Market Determination?

A Target Market Determination (‘TMD’) is a document that explains which people particular financial products may be suitable for (the target market) and sets out any conditions around how financial products can be distributed to consumers.

Why do product issuers provide Target Market Determinations?

From 5 October 2021, TMDs are compulsory for most financial products.

Issuers and distributors of financial products must take reasonable steps that are likely to result in financial products reaching consumers in the target market defined by the product issuer.

We recommend that you consider the TMD before making a purchase decision. Contact the product issuer directly for a copy of the TMD.

Canstar may earn a fee from its Online Partners for referrals from its website tables, and from sponsorship or promotion of certain products. Fees payable by product providers for referrals and sponsorship or promotion may vary between providers, website position, and revenue model. Sponsorship/promotion fees may be higher than referral fees. If a product is sponsored or promoted, it’s an ad and it is clearly marked as such. An ad might appear in different places on our website, such as in comparison tables and articles. Ads may be displayed in a fixed position in a table, regardless of the product's rating, price or other attributes. The location of an ad doesn’t indicate any ranking or rating by Canstar. Payment of fees for ads does not influence our Star Ratings. See How We Get Paid to find out more.

Past performance should not be relied upon as an indicator of future performance. The value of your investment may fall as well as rise.

Canstar is not authorised or registered to provide tax advice. Canstar does not provide legal or accounting advice. This article has been prepared for information purposes only and is not intended to provide and should not be relied upon for tax, legal or accounting advice. We recommend you seek advice from a qualified and registered (where applicable) professional adviser before making any financial or purchase decision.

SMSF loans