The 2025 financial year has brought a renewed focus on self-managed super funds (SMSFs) — particularly for Australians looking to invest in property. Whether you’re a seasoned SMSF trustee or exploring the idea of buying real estate with your super, staying across the latest changes is crucial.
This guide breaks down the 2025 SMSF property rules, including ATO updates, lender policy shifts, and practical implications for investors. We’ll also help you understand how to structure your SMSF property purchase for compliance and performance.
Why SMSF Property Investment Remains Popular in 2025
Despite market volatility and rising interest rates, SMSF property investing continues to appeal to Australians who want:
- Greater control over their retirement strategy
- Exposure to residential or commercial real estate
- Long-term capital growth and rental income
- Tax-effective investment structures
As of mid-2025, there are over 605,000 SMSFs in Australia managing more than $950 billion in assets — with a growing share held in direct property.
What’s New in 2025: SMSF Property Rule & Policy Updates
Here’s a breakdown of what’s changed in the past 12 months that affects SMSF property investors.
ATO Tightens Scrutiny on SMSF Loans and Related Party Leases
In April 2025, the ATO announced stricter audit activity on SMSFs engaging in:
- Non-arm’s length income (NALI) breaches
- Related party leases on commercial property
- Improper loan structures (especially private LRBAs)
Key Update:
From 1 July 2025, trustees must provide additional documentation for any related party lease agreements, including:
- Independent rental appraisals
- Signed commercial lease contracts
- Evidence of regular rental payments
What it Means:
If you’re leasing SMSF-owned commercial property to your business, ensure all dealings are clearly documented, compliant, and market-based.
Stricter Lender Policy on SMSF Residential Property Loans
While SMSF lending is still available in 2025, banks and lenders have become more selective.
| Policy | 2024 | 2025 Update |
| Max LVR (Residential) | 80% | 75% (most lenders) |
| SMSF Min Balance | $200,000–$250,000 | $250,000–$300,000 post-settlement |
| Fixed Rate Options | Widely available | Limited or withdrawn by some lenders |
| Interest-Only Period | Up to 10 years | Max 5 years with stricter criteria |
| Acceptable Property Types | Broad | Excludes high-density apartments, regional areas, and NRAS stock |
What it Means:
Expect to need a larger deposit (25%+), higher liquidity post-settlement, and tighter restrictions on acceptable properties. Pre-approval is more essential than ever.
Limited Recourse Borrowing Arrangement (LRBA) Guidelines Clarified
The ATO has clarified acceptable structures for bare trusts (custodian trusts) under LRBAs. Issues that previously triggered compliance concerns include:
- The SMSF being the legal property owner (not just beneficial owner)
- Confusion over naming conventions in the trust deed
- Missing or unsigned loan agreements between SMSF and lender
What it Means:
You must work with professionals (brokers, accountants, and solicitors) who are experienced in SMSF lending. Errors in structure can invalidate the borrowing.
New ASIC Guidelines on SMSF Advice and Property Spruiking
ASIC has increased enforcement action against unlicensed advisors and developers promoting SMSF property strategies.
From January 2025, SMSF trustees are now required to acknowledge (in writing) that:
- They have not received unlicensed investment advice
- They understand the compliance and risk obligations of SMSFs
- They have a documented investment strategy aligned with fund goals
What it Means:
Work with licensed mortgage brokers and qualified financial advisers. Pilbara Finance works closely with aligned professionals to keep you protected.
Market Conditions: Higher Rates, Steady Yields
- Interest rates: SMSF loan rates are now averaging 6.8%–7.3% (variable), or 7.5%+ (fixed, where available)
- Rental yields: Residential yields remain solid (4.5%–6% in select areas), while commercial yields remain attractive at 6.5%–8%
- Valuations: Property valuations are stable in metro areas but under pressure in regional or high-density markets
What it Means:
Lenders and SMSF auditors are paying closer attention to whether the investment truly serves the fund’s retirement goals — not just tax or short-term benefit.
SMSF Property Lending Checklist for 2025
Before you buy property in your SMSF this year, ensure you meet the updated criteria:
Eligibility
- SMSF is fully set up and compliant (ABN, TFN, bank account, trust deed)
- Investment strategy allows for direct property and borrowing
- You’re not planning to live in or rent the property to a related party (residential)
Finance
- Loan amount no more than 75% of property value
- Sufficient liquidity post-purchase (usually $100K–$150K minimum)
- Proof of regular super contributions
- SMSF balance typically $250K+ before purchase
Structure
- Bare trust (custodian trust) set up before contract is signed
- Property purchased in the name of the trustee of the bare trust
- Loan structured as a Limited Recourse Borrowing Arrangement (LRBA)
Compliance
- Independent property valuation
- Rental appraisal (if leasing commercial property to related entity)
- Signed, market-value lease agreement (for commercial property)
- Ongoing fund audits and SMSF tax returns
Comparison Table: SMSF Lending in 2024 vs 2025
| Feature | 2024 | 2025 |
| Max LVR (Residential) | 80% | 75% |
| Loan Terms | 30 years | 30 years |
| Interest Rates | 6.0%–6.5% | 6.8%–7.3% |
| Min SMSF Balance | $200K | $250K |
| Acceptable Use | Investment only | Investment only |
| SMSF Setup Costs | ~$3,000 | ~$3,000 |
| Loan Type | LRBA | LRBA |
Top 3 Mistakes to Avoid in 2025
Signing a Contract Before Your SMSF Structure is Set Up
This is a major compliance breach. You must establish the bare trust before signing a contract. A conditional offer is okay — but make sure your SMSF is ready.
Using a Non-Compliant Property
Your SMSF cannot:
- Buy property from a related party (unless it’s commercial and at market value)
- Rent residential property to a related party
- Subdivide, develop, or renovate using borrowed funds
Underestimating Costs
Beyond the purchase price, budget for:
- Stamp duty
- Legal fees
- SMSF setup and audit costs
- Loan application and valuation fees
- Ongoing property and maintenance expenses
Case Study: Business Owner Buying Commercial Premises in 2025
Client: Michelle, age 52
SMSF Balance: $450,000
Property: $600,000 office in Melbourne
Loan: $420,000 LRBA at 6.9% over 30 years
Strategy: Her business leases the premises from the SMSF at market rent ($45,000/year)
Compliance: Commercial lease agreement, independent valuation, and contributions structured for cash flow
Outcome:
Michelle now owns her office through her super, pays rent to her SMSF (not a landlord), and has tax-deductible lease payments.
What the Rule Changes Mean for Investors
- Higher liquidity and lower LVRs mean you need more capital upfront
- Compliance checks are tighter — documentation is everything
- SMSF lending is still available, but limited to experienced borrowers with solid advice
- Commercial property is still a strong option, especially for business owners seeking retirement and asset ownership synergy
- Max LVR → 75%
- Structure → Bare Trust & LRBA
- Residential Rules → No related parties
- Commercial Rules → Must have market lease
- Setup Timeline → 6–8 weeks
Final Thoughts: Navigating SMSF Property Rules in 2025
The SMSF property landscape has shifted — but the opportunity remains strong for strategic, well-advised investors. In 2025, success requires:
- Meticulous planning
- Strong documentation
- Working with experienced brokers and professionals
- A long-term mindset aligned to your retirement goals
Pilbara Finance specialises in helping investors across Australia access the right SMSF loan structures, navigate lender policies, and ensure ATO compliance every step of the way.
Speak to an SMSF Mortgage Specialist Today
Don’t leave your retirement strategy to guesswork. Let our team guide you through the lending and compliance process.
📞 Call us on 08 9122 3929
💻 Book a free SMSF Lending Consult using the form on the right
📍 We work with clients Australia-wide
About Pilbara Finance
Pilbara Finance has been helping Australians with their finance and lending needs for over 10 years. With a strong local presence in Perth, Karratha, Geraldton, Kalgoorlie, Port Hedland, Busselton, and Bunbury, our experienced brokers are here to support you with tailored lending solutions — no matter where you are on your financial journey.
