SMSF LRBA Accountant and Compliance Services
An SMSF is generally prohibited from borrowing, but a limited recourse borrowing arrangement can provide an exception where the statutory conditions are met. An SMSF LRBA accountant records the asset, holding arrangement, borrowing, repayments, income and expenses consistently and prepares the information required for the fund's annual accounts, audit and SMSF annual return.
Service at a Glance
Personalized scope & lodgementSection 67A & 67B Superannuation Industry (Supervision) Act 1993
Separate bare trust holding legal title; SMSF holds beneficial interest
Borrowings from 10 Aug 2026 restricted to business real property only
Single acquirable asset only; borrowed funds cannot fund improvements
ATO PCG 2016/5 safe harbor benchmarking preventing 45% NALI penalty tax
Executed loan deeds, bare trust records, interest schedules & valuations
- Pre-lodgement draft walkthrough & written client sign-off
- Extended ATO tax agent lodgement deadlines available
- Transparent upfront quoting & zero lodgement without approval
What is a limited recourse borrowing arrangement?
A limited recourse borrowing arrangement, or LRBA, is a structure under which an SMSF borrows to acquire a permitted asset. A separate holding trust generally holds legal title while the SMSF holds the beneficial interest and has the right to acquire legal ownership after making the required payments. If the borrowing defaults, the lender's recourse against the SMSF must be limited in the manner required by superannuation law.
The asset, use of borrowed money, ownership documents, loan terms and security must satisfy the legislation throughout the arrangement.
Why LRBA accounting needs separate attention
An LRBA creates records across the SMSF, lender and holding arrangement. The accounts generally recognize the asset and borrowing rather than treating the holding trust as an unrelated investment, helping the auditor trace ownership and loan movements.
Reconcile loan statements and separate principal, interest and fees
Distinguishing deductible interest costs and loan administrative charges from liability principal repayments.
Record acquisition and borrowing costs according to their treatment
Bifurcating immediately deductible outgoings, 5-year borrowing write-offs, and capitalized acquisition costs.
Account for rental or investment income and related expenses
Ensuring all asset earnings and property expenses flow directly through the SMSF primary bank account.
Maintain holding-trust or bare-trust records
Reconciling bare trust legal ownership with the SMSF's beneficial ownership on fund ledgers.
Track related-party loan terms, payments and supporting evidence
Documenting interest calculations, repayment frequency, and arm's-length evidence for private lenders.
Support year-end asset values and audit schedules
Preparing 30 June market valuation schedules and loan balance confirmations for the independent auditor.
Identify inconsistencies between legal documents and actual transactions
Proactively catching title discrepancies or payment deviations before annual return lodgement.
Strict Advisory Notice: Financially Up Pty Ltd provides accounting, tax and compliance support for existing and proposed LRBAs. We do not provide loan approval, credit assistance, legal documents or financial product advice about whether borrowing suits your retirement strategy. Those matters may require a lender, lawyer or authorized financial adviser.
What changed for real-property LRBAs from 10 August 2026?
For an LRBA entered into on or after 10 August 2026 to acquire real property, the property generally must be business real property when the LRBA is entered into and must remain business real property for the life of the arrangement. This restriction applies whether the lender is a bank, non-bank lender or related party.
Business real property generally means land and buildings used wholly and exclusively in one or more businesses, subject to the statutory definition. Other residential property may still be acquired by an SMSF if the investment rules are met, but it cannot be financed under a new LRBA caught by the change.
Post-10 August 2026: Business Real Property Only
New real property borrowing arrangements entered into on or after 10 August 2026 face strict statutory boundaries:
- The acquired property must be business real property at inception and remain so throughout the loan
- Applies equally to institutional banks, third-party lenders, and private related-party loans
- Residential property can still be acquired by an SMSF outright, but not financed under a new LRBA
Pre-Existing Arrangements & Refinancing
The change does not apply in the same way to an LRBA entered into before 10 August 2026, refinancing of that arrangement, or a binding acquisition contract exchanged before that date. Later variations still need review.
- Existing residential property LRBAs entered into prior to 10 August 2026 remain permitted
- Refinancing of an eligible pre-10 August 2026 arrangement can continue under transitional protections
- Binding contracts exchanged before the cutoff date are protected under transitional rules
Single acquirable asset, repairs and improvements
For arrangements governed by section 67A of the Superannuation Industry (Supervision) Act 1993, borrowed money may be applied to acquire a permitted single acquirable asset or a permitted collection of identical assets. It may also fund certain acquisition expenses and the maintenance or repair of the asset. Borrowed money cannot be used to improve the asset.
The distinction between repair, maintenance and improvement is fact-dependent. Major renovations, redevelopment, subdivision, replacement of the asset or changes to property use can raise issues beyond bookkeeping. Trustees should obtain appropriate advice before committing borrowed funds or changing the asset.
Permitted Applications of Borrowed Money
Under S67A SISA, borrowed proceeds may strictly be applied towards:
- Acquisition of a single acquirable asset under a single legal title
- Certain upfront acquisition expenses (conveyancing, stamp duty, loan setup fees)
- Routine repair and maintenance to restore the asset to its original operating state
Prohibited Uses & Capital Improvements
Borrowed money cannot be used to improve the asset. Activities raising immediate compliance risks include:
- Subdivision of real estate resulting in multiple separate titles
- Substantial redevelopment or construction creating a different asset
- Funding renovations or improvements with borrowed loan proceeds
Related-party loans and arm’s-length dealing
An SMSF may borrow from a related party where the LRBA and other rules are satisfied, but the terms and conduct require careful support. Non-arm's-length terms can create superannuation compliance concerns and may affect the tax treatment of income from the asset.
The ATO's PCG 2016/5 describes safe-harbor terms for certain LRBAs, but the ATO is reviewing that guidance following the 2026 changes. An arrangement outside a safe harbor is not automatically non-arm's-length; trustees need evidence supporting the terms and actual conduct. A legal adviser should draft or amend loan agreements.
ATO PCG 2016/5 Safe Harbor Parameters
To prevent non-arm's-length income (NALI) implications, related-party loan arrangements must reflect commercial lending realities:
- Commercial interest rates matching standard Reserve Bank Indicator Rates
- Documented Loan-to-Value Ratio (LVR) limits (e.g., maximum 70% for real property)
- Maximum loan term caps and regular principal-and-interest monthly repayments
- Formal registered registered mortgage or personal property security charge
Non-Arm's-Length Income (NALI) Risk & Legal Deeds
If loan terms or lender conduct are artificially lenient (e.g., 0% interest, uncommercial deferrals, or no formal mortgage), the ATO may classify all net income and capital gains from the property as NALI, taxed at the top marginal rate of 45%.
Annual LRBA compliance and records
The LRBA must be reflected in the SMSF's annual accounts, tax calculations and audit file. Where the acquired asset is property, the ordinary property rules also apply, including annual market-value evidence, related-party restrictions and correct treatment of income and expenses.
How Financially Up can help with SMSF LRBA compliance
Financially Up can review the records against the LRBA, reconcile the borrowing, prepare asset and liability balances, account for income and expenses, prepare audit schedules and coordinate the arrangement with the annual accounts and tax return.
For a proposed arrangement, our role can help identify the accounting records and entity details required. A new fund may also need our SMSF establishment service. Legal structure, lending and financial product advice remain separate professional services.
Why choose Financially Up?
Financially Up Pty Ltd is a registered tax agent (registration number 26242127) with more than 10 years of experience. Our team includes CPA and IPA professionals. We provide Australia-wide support through online appointments, with in-person appointments also available. Our LRBA work focuses on accurate accounting, tax reporting and practical compliance support.
Registered Tax Agent
Financially Up Pty Ltd is a registered tax agent (registration number 26242127) with more than 10 years of experience.
CPA & IPA Professionals
Our qualified specialists include CPA and IPA professionals with deep experience across complex superannuation borrowing compliance.
Australia-Wide Support
We provide Australia-wide support through online appointments, with in-person appointments also available. Our LRBA work focuses on accurate accounting, tax reporting and practical compliance support.
Frequently asked questions
Common questions about the 10 August 2026 borrowing changes, grandfathered residential loans, repairs vs improvements, and related-party financing.
A new LRBA can still be used to acquire real property, but the property generally must be business real property at the time the arrangement is entered into and throughout the LRBA. Transitional rules apply to certain earlier arrangements and binding contracts.