LRBAs and bare trusts
How an SMSF borrows, and what limited recourse actually protects.
Superannuation funds generally cannot borrow. The limited recourse borrowing arrangement is the exception, and it comes with a structure, a set of rules and - since August 2026 - a much narrower field of things it can buy.
What changed
Business real property only, for new arrangements.
From 10 August 2026, an LRBA entered into to acquire real property can only acquire business real property, tested at the time the arrangement is entered into. Existing arrangements continue and can be refinanced; contracts exchanged before that date are unaffected.
General information, current at the time of writing. The rules on borrowing inside super are detailed and the consequences of getting them wrong sit with the trustees personally, so take advice on your own arrangement rather than relying on a summary.
The structure
What has to exist, and in what order.
A compliant SMSF purchase has more moving parts than an ordinary one, and the sequence matters more than the paperwork.
- 01
The advice comes first.
Whether the fund should borrow at all, and whether the purchase leaves it diversified and liquid enough afterwards.
- 02
The structure is built.
The fund, usually with a corporate trustee, and a separate bare trust with its own trustee to hold the property while the loan exists.
- 03
The bare trustee signs.
The contract is signed by the bare trustee, not the fund. Get the names wrong here and you are into rework and possibly extra duty.
- 04
The fund repays, then takes title.
Rent and contributions service the loan. When it is repaid, the property transfers from the bare trust to the fund outright.
The lending itself sits with LINK Advance.
Most major banks left SMSF lending, so it runs through a specialist panel with its own deposits, appetites and timeframes. Jacob at LINK Advance does that end; the strategy and the compliance stay here. LINK Wealth does not arrange loans.
Borrowing, answered.
What is a limited recourse borrowing arrangement?
The only way an SMSF is allowed to borrow to buy an asset. The loan is limited recourse, meaning that if the fund cannot repay, the lender's claim is limited to the asset the loan bought and cannot reach the rest of the fund's assets. That protection is why the structure exists, and why lenders are conservative about it.
Why does an LRBA need a bare trust?
Because the fund is not allowed to hold a charged asset directly. The property is held by a separate trust - a bare trust, sometimes called a holding trust - with its own trustee, while the loan is on foot. The fund is the beneficial owner throughout and takes legal title once the loan is repaid. It is an extra entity with its own deed and its own costs, and it has to exist before contracts are signed.
What can an SMSF borrow to buy now?
Business real property. Since 10 August 2026 a new LRBA can only be used to acquire real estate used wholly and exclusively in one or more businesses - in practice, the premises a business trades from. New borrowing for residential investment property is no longer available. Arrangements entered into before that date continue and can be refinanced, and contracts exchanged before it are unaffected.
Does limited recourse mean my super is safe?
Partly, and it is worth being precise. The lender's recourse against the fund is limited to the property itself, so the fund's other assets are protected from the lender. But lenders commonly require personal guarantees from members, which sit outside that protection. So the fund's other assets are shielded; the members' own position may not be. That is one reason lenders insist on a liquidity buffer, and why the fund's cash flow should be tested against a vacancy before anyone signs.
Can the fund renovate a property it borrowed to buy?
Repairs and maintenance, yes. Improvements are the line: while the LRBA exists, borrowed money cannot fund improvements and the asset cannot be fundamentally changed into a different asset. The fund can pay for some improvements from its own cash within limits. The distinction has real consequences, so it is a question for the fund's advisers before it is a question for a builder.
One loan, one property?
Effectively, yes. An LRBA can only fund a single acquirable asset. Two properties means two arrangements, with two bare trusts and two sets of costs - which is part of why the structure suits a single substantial purchase rather than assembling a portfolio.
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Should your fund be borrowing at all?
That question comes before the lender, the rate and the structure. We will look at the balance, the liquidity left after settlement and whether the purchase actually improves your position.
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