Lending money to your SMSF
One of the lessor known benefits of having a SMSF is the flexible financing options that are available.
Many SMSF trustees still don’t realise they can actually lend money to their SMSF and charge the sort of rates achieved by banks and other financial institutions.
It’s possible to lend money to your own SMSF through a Limited Recourse Borrowing Arrangement, this is commonly called a member loan.
The structure is simple, instead of your SMSF going to the bank to get a loan to buy an asset, usually a property, your SMSF can lend money directly from you as a member of the SMSF.
If you have any questions regarding how you can lend money to your SMSF please feel free to contact;
Cayle Petritsch
SMSF Specialist Advisor
T: 02 9984 7774
E: caylep@nac.com.au
Martin van der Saag
Director
T: 02 9984 7774
E: martinv@nac.com.au
“Lending money to your SMSF is permitted — but only when it’s done on strict, arm’s-length terms.”
About the author
Cayle Petritsch - Director & Wealth Advisor
Cayle Petritsch, Director and Wealth Advisor, works with our existing clients who have recognised the importance of business owners making strategic financial choices not only for their company, but for their personal finances too.
Cayle saw a great opportunity to expand North Advisory’s services into SMSF/superannuation, personal wealth management, asset protection services and other crucial personal finance facets that business owners need to consider.
His approach to wealth management allows you to receive highly personalised wealth advice. Working closely with Marius, Cayle understands the unique needs of every client, from their lifestyle and business goals to their retirement plans.
Key Takeaways
Lending Is Allowed but Highly Regulated
SMSF loans from members or related parties must meet strict superannuation compliance requirements.
Arm’s-Length Terms Are Essential
Interest rates, repayment terms and documentation must mirror commercial lending arrangements.
Documentation Matters
Formal loan agreements and proper record-keeping are critical to demonstrating compliance.
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Frequently Asked Questions
Can I lend money to my SMSF?
Yes. Members and related parties can lend money to an SMSF, provided the loan is on commercial, arm’s-length terms and properly documented.
Why would an SMSF need to borrow from a member?
Loans are commonly used to assist with liquidity, cover short-term cash flow needs, or help fund an asset purchase such as property.
What does ‘arm’s-length’ mean in this context?
It means the loan terms — including interest rate, repayment schedule and security — must be comparable to what an unrelated lender would require.
What are the risks of lending to my SMSF?
If loan terms are not commercial or correctly documented, the arrangement may breach superannuation rules and attract penalties.
Should professional advice be obtained before lending to an SMSF?
Absolutely. Structuring the loan correctly helps protect both the SMSF and the lender from compliance and tax issues.
Can I use my own money to help my SMSF buy a property instead of going to a bank?
Yes — if your SMSF is purchasing an asset (often property), you may be able to fund it using a member loan under a Limited Recourse Borrowing Arrangement (LRBA) instead of a traditional bank loan.
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