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SMSF lending glossary

Written by the smsfrefinance.au editorial team · Reviewed by Nick Clunes, The Lending Lab

Credit Representative 530711 · Australian Credit Licence 387856 · ACN 651 936 337

Published 1 September 2026 · Last reviewed 1 September 2026

Draft v1, pending broker compliance review before launch.

SMSF borrowing has its own vocabulary, and most of it is doing real work rather than dressing things up. These are the terms that decide what a fund can and cannot do, defined in plain words with no advice attached.

Limited recourse borrowing arrangement (LRBA)

The only structure through which an SMSF can borrow to buy property. An LRBA is the borrowing structure superannuation law permits an SMSF to use. The fund borrows to acquire a single asset, that asset is held in a separate holding trust, and the lender's recourse on default is limited to that asset alone. The rest of the fund cannot be pursued, which is why LRBA lending is priced above ordinary property lending and why lenders apply their own tests on top of the law.

Bare trust (holding trust)

The separate trust that legally holds the property until the loan is repaid. Under an LRBA the property is held by a separate trustee in a bare trust, sometimes called a holding trust or custodian trust, for the benefit of the SMSF. The fund holds the beneficial interest and takes legal title once the loan is repaid. Refinancing does not disturb the bare trust: the security is the same asset and the holding trust continues, which is part of why a refinance is far simpler than a purchase.

Business real property

Land and buildings used wholly and exclusively in a business. Business real property means freehold or leasehold interests in land where the underlying use is wholly and exclusively in one or more businesses. It is the category that lets an SMSF do things residential property cannot: acquire the asset from a related party at market value, and lease it to a related party on arm's length terms. The 2026 change closed most new residential SMSF lending but left business real property open.

In-house asset

A fund investment in a related party, capped at 5% of fund assets. In-house assets are loans to, investments in, or leases with related parties of the fund, and they are capped at 5% of the fund's total assets. Business real property leased to a related party is specifically excluded from that cap, which is the exception that makes owning your own business premises inside an SMSF workable.

Related party

Members, their relatives, and entities they control. A related party includes fund members, their relatives, their business partners, and companies or trusts those people control. Superannuation law restricts what a fund may acquire from a related party and how it may deal with one. Business real property is the main exception on acquisition; residential property is not, and cannot be bought from a member or their relative at any price.

Arm's length

Dealings priced as if between unrelated parties. Every SMSF dealing must be on arm's length terms: market rent, market value, commercial loan terms. Getting this wrong can push income into the non-arm's length income category, taxed at the top marginal rate rather than the concessional fund rate. It applies to a related-party lease of business real property just as it applies to any other dealing.

Loan to value ratio (LVR)

The loan balance as a percentage of the property's value. LVR is the loan divided by the property value. On a $850,000 loan against a $1,200,000 property the LVR is about 71%. It is the single number that most determines which SMSF refinance pathways are available and at what rate: most lanes price to 80%, a smaller panel lends to 85%, and a few to 90% with a corporate trustee.

Liquidity test

A lender rule on how much cash the fund keeps after settlement. Several lenders require the fund to retain a buffer of liquid assets after settlement, commonly around 5% of the fund's value, so contributions and rent are not the only thing standing between the fund and a missed repayment. It is a lender policy rather than a legal requirement, and a number of lenders on the panel apply no liquidity test at all.

Easy refinance

A refinance assessed on repayment conduct rather than fresh income documents. Easy refinance, sometimes called like-for-like or express refinance, is a streamlined pathway where a lender assesses a clean 6 to 12 month repayment history instead of running a full serviceability reassessment. It generally requires the new repayment to be no higher than the current one, dollar-for-dollar borrowing with no cash out, and can often reuse the existing legal advice.

Dollar-for-dollar

Refinancing only the existing balance plus costs, with no equity release. Almost every SMSF refinance is dollar-for-dollar: the new loan pays out the old balance plus reasonable capitalised costs, and nothing more. Releasing equity from an SMSF property is a materially different transaction, restricted by both lender policy and superannuation law, and one that needs licensed advice rather than a calculator.