SMSF Lending in 2025: Your Guide to What's Changed

Self-Managed Super Funds (SMSFs) have long been a powerful vehicle for Australians looking to take control of their retirement savings. In recent years, one of the most compelling strategies has been using an SMSF to purchase property through a Limited Recourse Borrowing Arrangement (LRBA).

In 2025, SMSF lending is undergoing some major changes—some of which make property investment through super more accessible than ever before.

Whether you're a first-time SMSF trustee, a seasoned investor, or simply exploring whether SMSF property investment aligns with your goals, it's essential to understand what’s changed, what’s stayed the same, and how to navigate the lending landscape this year.

SMSF Loan-to-Value Ratios Are Increasing

Until recently, many SMSF loans were restricted to a conservative 60%–70% Loan-to-Value Ratio (LVR), requiring SMSF trustees to contribute significant capital upfront from the fund's assets.

In 2025, several lenders—especially non-bank lenders—are now offering SMSF property loans at up to 80% LVR.

This is a major shift that reduces the deposit required from the SMSF and enhances borrowing capacity, particularly for those looking to invest in commercial property or purchase investment property aligned with their fund’s investment strategy.

This change opens the door for more SMSF members to diversify their portfolios by accessing high-value assets that were previously out of reach due to capital constraints.

More Property Types Now Qualify

Previously, strict lending rules and lender risk appetites limited the types of properties SMSFs could borrow for.

In 2025, lenders—particularly SMSF lending specialists—have broadened their approval criteria.

Eligible properties now include:

• Commercial properties used by related businesses under arm's length lease terms
• Industrial warehouses and showrooms
• Certain off-the-plan residential units, provided they meet valuation requirements
• Dual-purpose assets (e.g. part commercial, part residential), subject to compliance with the SMSF’s investment purpose

This broader scope allows trustees to make more tailored investment decisions while still complying with the sole purpose test and other Australian Taxation Office (ATO) rules.

Surge in Non-Bank and Specialist Lenders

Traditional banks continue to impose tighter SMSF borrowing rules—especially following updates from the ATO and financial regulators. However, 2025 has seen a rise in alternative lenders and fintech platforms offering competitive SMSF home loans with greater flexibility.

Non-bank SMSF lending providers are often more willing to:

• Assess non-standard income (such as rental income or contributions)
• Accommodate SMSF members with less liquidity
• Offer faster approvals through digital portals
• Accept non-traditional or niche property types

This shift is particularly beneficial for SMSF trustees seeking to purchase commercial property, as many of these lenders specialise in bespoke funding solutions that reflect real-world investment strategies.

Digital Loan Applications and Faster Turnarounds

The SMSF lending application process has historically been paper-heavy and slow. In 2025, that’s no longer the case.

Most lenders now support:

• Digital ID verification
• Online document uploads
• Real-time SMSF compliance checks
• Application tracking dashboards

These advances reduce loan processing times from weeks to days and provide greater transparency to fund members. This agility helps trustees act quickly when market opportunities arise, especially in fast-moving commercial property sectors or competitive residential markets.

Regulatory Updates from the Australian Taxation Office

The ATO has released updated guidance this year clarifying several areas of SMSF borrowing—particularly regarding Limited Recourse Borrowing Arrangements (LRBAs).

Key changes include:

• Confirmation of how rental income from an SMSF property must be treated for serviceability
• Reinforcement of the need for SMSF trustees to follow proper arm’s length arrangements in related-party leases
• Stricter enforcement of the single acquirable asset rule for LRBAs
• Tighter scrutiny of SMSF’s trust deed provisions to ensure borrowing is permitted under fund rules

Trustees now have greater clarity about what constitutes a compliant borrowing structure, reducing the risk of breaching superannuation rules and facing tax penalties.

Contribution Caps and Fund Liquidity Still Matter

Although borrowing has become more accessible, trustees must be mindful of the SMSF's ability to meet loan repayments without breaching contribution caps or running into liquidity issues. The concessional contributions cap remains at $27,500, and exceeding this could trigger additional tax obligations.

Fund members should consider strategies such as:

• Maintaining adequate cash reserves in the fund
• Structuring investment property purchases to ensure positive rental income
• Reviewing the fund’s investment strategy regularly to support debt serviceability

These factors are crucial for long-term compliance and sustainable fund performance.

SMSF Trustees Must Revisit Investment Strategies

With these lending changes, SMSF trustees must update their fund’s investment strategy to reflect:

• The use of gearing
• The risks associated with borrowing
• How the property aligns with the fund’s retirement objectives
• The impact of loan repayments on cash flow and future benefits

An outdated or vague strategy could lead to compliance issues, so it’s best practice to document detailed reasoning for the investment decision—including expected capital growth and retirement planning outcomes.

Final Thoughts: What This Means for SMSF Lending in 2025

The 2025 SMSF lending landscape presents real opportunities for trustees—particularly those looking to diversify with property investment.

Key takeaways:

• Higher LVRs mean lower upfront cash requirements
• More property types are now eligible for borrowing
• Non-bank lenders offer flexible, fast solutions
• Digital loan processes streamline trustee workloads
• ATO updates create clearer compliance pathways

However, as with all SMSF decisions, the devil is in the details. Trustees must ensure their superannuation fund’s trust deed permits borrowing, their investment aligns with the fund’s objectives, and that all transactions comply with SMSF borrowing rules and ATO regulations.

Causbrooks Finance: SMSF Lending Specialists You Can Trust

At Causbrooks Finance, we work closely with SMSF trustees, accountants, and financial advisers to secure the right SMSF home loan or commercial loan tailored to your goals.

Whether you’re ready to purchase investment property through your SMSF or just want to understand your borrowing capacity, we’ll help you:

• Navigate SMSF borrowing rules with confidence
• Compare lenders across the market, including SMSF lending specialists
• Structure your fund to meet compliance and maximise tax benefits
• Ensure your investment decisions align with your retirement savings goals

Start your SMSF lending journey today with expert guidance and transparent advice.

Contact us now for a free consultation.