Purchasing direct property through a Self-Managed Super Fund (SMSF) has been a popular investment strategy since the introduction of Limited Recourse Borrowing Arrangements (LRBAs) in September 2007. These arrangements allow SMSFs to borrow money to acquire assets such as residential or commercial properties. Financial advice to an SMSF is considered a complex area and is closely monitored by ASIC because:

SMSFs require trustees to understand and comply with tax and superannuation laws.
People are frequently targeted to start an SMSF through various schemes for inappropriate or illegal reasons that could result in losing some or all of their retirement savings.

SMSF loans are different from borrowing in your personal name or through a family trust. When assessing the borrowing capacity of an SMSF, your personal situation, such as income, living expenses, or existing home loans, is generally not considered. For income, lenders typically look at superannuation guarantee contributions, voluntary contributions, and rental income from proposed or existing properties. For expenses, they review SMSF running costs and any property-related outgoings. Because of this structure, using SMSF to purchase property is often a preferred approach for investors who have already reached their personal borrowing capacity or who may not have enough deposit to buy property in their own name. Whether you’re exploring SMSF lending near Epping, SMSF lending near North Ryde, or SMSF lending near Parramatta, the principles and setup process remain largely the same, but having access to local experts can make a big difference in ensuring your structure is compliant and efficient.

Where to Start

If you decide to use this strategy to buy your next investment property or enter the property market, the best place to start is by speaking with an experienced mortgage broker. You can obtain a pre-approval without setting up the SMSF structure first. This can save you time, money, and effort if it turns out you’re unable to secure the loan amount needed for your desired property range. If you’re unsure whether this strategy is appropriate for your situation, it’s important to seek advice from a licensed financial adviser. However, financial advice is no longer a requirement for obtaining an SMSF loan with most lenders. You can also refer to my other article Is a Self-Managed Super Fund (SMSF) Right for You? to complete a self-check.

Who Can Set Up the SMSF Borrowing Structure for You?

If you’re confident and understand the process, you can set up the structure yourself using an online legal document delivery and management service. However, this is a tedious process that’s easy to get wrong. You’ll also need an SMSF administrator to help you run the fund, so it’s generally recommended that you set up the structure through an accounting firm that has a dedicated SMSF services team.

How Much Does It Cost to Set Up an SMSF?

You generally need four entities for an SMSF loan structure. The corporate trustee for the bare trust will be the legal owner of the property and hold the title on behalf of the SMSF, which is the beneficial owner.

The required entities are:

Corporate trustee for your SMSF
SMSF
Corporate trustee for the bare trust
Bare trust

You’ll incur the following costs:

SMSF trust deed
ASIC company registration fees
Bare trust deed
Professional fees (accountant or adviser assistance)

Typically, SMSF setup fees are around $2,000, including ASIC company registration costs. Setting up a bare trust with a corporate trustee will cost approximately $2,000 as well.

How Long Does It Take to Set Up an SMSF Borrowing Structure?

As mentioned earlier, there are two trusts involved in the structure: the SMSF and the bare trust. Once you’ve decided on the names for the four required entities, it only takes a few hours to generate the legal documents, obtain the ABN, and register for the TFN of the SMSF. In terms of sequence, you should set up your SMSF structure first. The bare trust can then be established either at the same time as the SMSF or once your offer has been accepted by the vendor. Ideally, before you’re ready to purchase a property, your SMSF should already be established with funds rolled over from your existing super account. However, sometimes things can move quickly, and you may not have your SMSF ready in time. Here are a few key factors to consider when planning your SMSF home loan:

1. ATO Approval

Setting up the SMSF and obtaining an ABN can be completed within hours, but getting ATO approval may take anywhere from one week to over 28 days, depending on the time of year. For a newly established SMSF, you may see one of the following statuses on the Super Fund Lookup portal:

Election to be regulated is being processed
Registered – allows super fund rollovers under this status
Regulation details withheld
Complying – this is the status lenders require before approving the loan

For example, one of my clients set up their SMSF on 30 May. The status initially read “Election to be regulated is being processed. Please try again on or after 28 June.” On 28 June, it changed to “Please try again on or after 26 July,” meaning the ATO had delayed the process. After the initial 28 days, you’re allowed to contact the ATO directly to follow up. In this case, the SMSF was approved as complying after 27 business days (39 calendar days) from setup. If you don’t plan ahead and rush the process, you risk losing your deposit or wasting money setting up a structure that’s not approved by the ATO. It’s rare, but I’ve seen cases where newly established SMSFs were disapproved by the ATO — it does happen.

2. How Fast Your Structure Specialist Can Act

If your offer is accepted before your SMSF is set up, you’ll need a team that can act quickly to meet deadlines and avoid delays.

3. Super Rollover Timing

If your existing super fund is an industry fund (for example, AustralianSuper or REST), the rollover may take around a week. However, if you have a wrap account, it may take longer, as you might need to sell investments before the funds can be rolled over. Depending on the investments, this could take several business days or more.

Final Thoughts

Setting up an SMSF to purchase property can be a smart strategy for experienced investors looking to diversify their super and gain exposure to real estate. However, the process requires careful planning, compliance awareness, and coordination between your accountant, mortgage broker, and SMSF administrator.Getting professional help from the beginning can save you time, prevent costly mistakes, and ensure your SMSF property investment journey starts on the right foot.

Ready to Explore SMSF Property Investment?

If you’re considering using your SMSF to purchase property, I can help you understand your borrowing options and guide you through the pre-approval process before you commit to setting up your structure.Reach out today for an initial discussion — let’s make sure your SMSF loan strategy is set up the right way from the start. Click here to book your complimentary initial meeting with Cordelia

Author:

Cordelia Jia

Founder & Finance Broker

Cordelia holds a Master of Professional Accounting and a Diploma of Finance and Mortgage Broking Management. With over a decade of experience in the financial service industry, she is a seasoned expert and a reliable partner in navigating your loan journey.

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