Refinancing an SMSF Loan: What Trustees Should Know

Why trustees refinance SMSF loans

• The rate or fees are higher than what other lenders currently offer for a similar loan.
• A fixed-rate or interest-only period is ending and the fund needs to choose what comes next.
• The current lender has stopped offering SMSF loans or changed its policy.
• The fund wants different loan features, such as an offset account where a lender offers one.

The rules a refinance must follow

An SMSF borrows through a limited recourse borrowing arrangement. The property is held in a separate holding trust until the loan is repaid, and if the loan defaults, the lender's recourse is limited to that property.

Super laws allow a fund to refinance an existing arrangement, but the new loan must stay limited recourse and be over the same property. A refinance is not a way to take out equity for other purposes, and borrowed money cannot be used to improve the property. The fund's trust deed and the holding trust documents also need to allow the new loan.

From 10 August 2026, SMSFs can no longer enter into new limited recourse borrowing arrangements to buy residential property. Where a contract was exchanged on or before 9 August 2026, the change may not apply, and existing arrangements are treated differently from new ones. If your fund holds residential property, ask your SMSF adviser or accountant how the change applies before refinancing.

What lenders look at

• Loan to value ratio: lenders usually cap SMSF loans at a lower share of the property's value than standard investment loans.
• Servicing: whether the rent and the members' super contributions cover the repayments.
• Liquidity: many lenders want the fund to keep a cash or liquid buffer after the refinance.
• Structure: who the trustee is (some lenders require a corporate trustee), and the fund's financial statements and recent tax returns.

Costs to weigh

A refinance can involve discharge fees from the current lender, application and valuation fees, legal costs for the new loan and holding trust documents, government fees and, on fixed-rate loans, break costs. These are compared with the savings on rate and fees over the period the fund expects to keep the loan.

Danny reviews the current rate, fees and loan terms, checks which lenders on our panel will refinance the arrangement, and works with your accountant on the documents the fund needs. If staying with the current lender is the better option, he will tell you.

We do not provide financial, tax, legal, superannuation or investment advice. SMSF lending can be complex. Please seek independent professional advice before making SMSF decisions.