The easiest way to refinance an SMSF loan

Refinancing an SMSF loan means entering a new loan contract for the same asset, either with your current lender or a new one. The decision to refinance typically follows a fixed rate expiry, a shift in your fund's cash flow, or a better rate becoming available elsewhere.

Woollahra professionals managing SMSFs often hold residential property inside their fund, whether a terrace in Paddington or a unit near Bondi Junction. If you entered your limited recourse borrowing arrangement before 10 August 2026, you can still refinance that loan without the new business real property restriction applying. If you entered the arrangement on or after that date, the property must meet the business real property definition at all times during the loan, including after refinancing.

Why a fixed rate expiry is the most common refinance trigger

When your SMSF loan reverts from a fixed rate to the lender's standard variable rate, your repayments can increase sharply. Revert rates sit well above new customer rates and above most advertised variable rates. A fund holding a Woollahra terrace under a $2 million loan might see monthly repayments rise by several hundred dollars once the fixed term ends.

Refinancing before or shortly after the revert date allows you to lock in a new fixed term or move to a lower variable rate with another lender. Most trustees review rates 90 days before expiry to allow time for an application, valuation and settlement. If you wait until after the revert date, you are already paying the higher rate while the refinance processes.

When the loan structure no longer suits the fund's strategy

SMSF loans are initially structured to match the fund's expected cash flow and the member's retirement timeline. Consider a fund that financed a Bondi Junction apartment with a principal-and-interest loan, intending to pay it down before the member entered pension phase. A few years later, the member's employment income increases and they redirect contributions into other investments, leaving less cash in the fund for loan repayments. Refinancing to an interest-only loan frees up cash flow inside the fund and aligns repayments with the revised strategy. The property continues to generate capital growth and the fund maintains flexibility.

Refinancing after 10 August 2026 under the business real property rule

An LRBA entered into on or after 10 August 2026 over real property can only finance business real property. Business real property generally means land and buildings used wholly and exclusively in one or more businesses. If you entered your arrangement before that date, the rule does not apply to you when you refinance. If you entered on or after 10 August 2026, the property must meet the business real property definition during the entire life of the loan, including after refinancing.

A Woollahra-based consultant who purchased a small commercial premises in Bondi Junction under an LRBA entered in September 2026 must ensure the premises remains leased to an operating business. If the tenant vacates and the property sits vacant, or the trustee decides to convert it to residential use, the property no longer meets the definition and the SMSF has breached the borrowing prohibition. Refinancing does not restart the clock on this requirement, it carries through to the new loan.

How to compare lenders for SMSF refinance

SMSF lenders are a smaller group than standard home loan lenders. Not all authorised deposit-taking institutions offer SMSF loans, and those that do often have stricter loan-to-value ratios and higher rates than owner-occupier or standard investment loans. Comparing lenders involves checking the interest rate, the maximum loan term, whether offset accounts are available (only genuine offset accounts from an ADI are permitted), and whether the lender will accept the property type and location.

A unit in Rushcutters Bay or a terrace in Paddington will generally be accepted by most SMSF lenders. A higher-value property in Bellevue Hill or Darling Point may require a lender comfortable with prestige assets and higher loan amounts. Some lenders cap SMSF loans at a certain dollar value, others will lend above that threshold but require a larger deposit or charge a higher rate.

A specialist SMSF refinance broker can access the full panel of SMSF lenders and identify which will offer the most suitable rate and structure for your fund's circumstances. Applying directly to a lender without comparing the market often results in a higher rate or a loan structure that does not match the fund's strategy.

What happens during the SMSF refinance application and settlement

Refinancing an SMSF loan follows a similar process to refinancing a standard home loan, with additional documentation related to the fund's compliance and the holding trust. The lender will require a copy of the SMSF trust deed, the holding trust deed, the current loan contract, the latest financial statements for the fund, and identification for the trustees. A valuation of the property is ordered, and the lender assesses the fund's ability to service the new loan based on contributions, rental income (if applicable), and the member's retirement timeline.

Once the loan is approved, settlement involves discharging the existing lender's security over the asset held in the holding trust and registering the new lender's security. The asset does not transfer to the SMSF during this process, it remains in the holding trust. If you are switching lenders and creating a new holding trust, the asset must transfer directly from the old holding trust to the new one without the SMSF trustee taking temporary legal title.

Settlement typically takes four to six weeks from application, depending on the lender's processing time and the complexity of the fund's structure. During this period, the existing loan remains in place and repayments continue as normal.

Related party lenders and arm's length terms during refinance

A related party can lend to an SMSF under an LRBA, but the terms must be consistent with a loan from an unrelated party. The interest rate cannot exceed an arm's length rate, and the loan must be documented with a written agreement. If you refinance an SMSF loan from a bank to a related party, or from one related party to another, the new loan must meet these requirements.

The ATO's Practical Compliance Guideline PCG 2016/5 sets out arm's length terms for LRBAs. An appropriate rate can be determined by reference to the Reserve Bank of Australia's Indicator Lending Rates for a similar borrowing. If the related party is on-lending funds they borrowed elsewhere, they can charge a margin above their own borrowing cost, provided the SMSF is not charged more than an arm's length rate. Non-arm's length income is taxed at 45 per cent, so getting the rate wrong has a material cost.

When varying the loan does not count as refinancing

Not every change to your SMSF loan results in a refinance. Varying the loan contract does not always create a new arrangement, it depends on the nature and extent of the variation and the intention of the parties. Relevant factors include whether the original agreement allowed the parties to vary the terms and whether updating one condition ended up changing additional conditions.

A fund with a variable rate SMSF loan might request a rate reduction from the existing lender without refinancing. If the lender agrees and issues a variation letter confirming the new rate, and no other terms change, this is a variation rather than a refinance. If the lender requires you to sign a new loan contract, create a new holding trust, or agree to materially different terms, the original arrangement has ended and a new one has started.

Each situation is different. If you are unsure whether a proposed change counts as a refinance, the consequences matter. A refinance of an arrangement entered before 10 August 2026 does not trigger the business real property rule, but entering a new arrangement on or after that date does.

Does refinancing affect your total super balance

From 30 June 2026 a member's total super balance includes their share of the outstanding LRBA balance if the LRBA was entered into on or after 1 July 2018, and either the lender is a related party or the member has met a condition of release with no cashing restriction. Some LRBAs entered before 1 July 2018 and refinanced on or after that date are also included, unless the refinanced amount is the same or less and the new borrowing is secured by the same asset.

If your LRBA meets these conditions, refinancing can affect your total super balance calculation. A higher total super balance may reduce your eligibility for certain contribution caps or trigger Division 296 tax if your balance exceeds the threshold. If your LRBA was entered before 1 July 2018 and you refinance for the same or a lower amount over the same asset, your total super balance is not affected.

Call one of our team or book an appointment at a time that works for you. We work with Woollahra professionals and self-employed clients who need clarity on SMSF loan options and refinancing triggers, and we can connect you with the right lender for your fund's circumstances.

Frequently Asked Questions