SMSF Construction Loans

Building a property inside a self-managed superannuation fund adds a layer of complexity that most lenders are not equipped to handle. The LRBA structure, the trust deed requirements, the SIS Act compliance, the specialist lender pool: each of these narrows the field considerably. Settled Funding Group works with SMSF trustees who want to construct rather than purchase, identifying specialist non-bank lenders whose policy fits the fund structure and the build.

Who This Is For

• •SMSF trustees wanting to build a residential or commercial investment property within the fund
• •SMSFs holding land and wanting to construct rather than purchase an existing building
• •Investors who want exposure to new construction within their super structure
• •SMSFs building to generate rental income within the fund
• •Those who have received financial advice to add a new build property to their SMSF
• •Borrowers whose SMSF already holds a suitable land asset and are ready to proceed to construction

How SMSF Construction Finance Works

SMSF loans operate under a Limited Recourse Borrowing Arrangement, which limits the lender's recourse to the asset being purchased. Construction adds another dimension: the fund must have sufficient liquidity to service the loan and meet contribution requirements throughout the build. Joseph Farhat reviews the trust deed, the fund's financial position, and the build plan, then identifies specialist lenders from the panel who are active in this market. Most major banks have exited SMSF construction lending. The panel of specialist non-bank lenders that remain is narrow but workable with the right preparation.

What Lenders Assess for SMSF Construction Loans

• •SMSF trust deed: must permit borrowing for investment property and be current and correctly structured. An out-of-date or non-compliant trust deed is the most common reason SMSF construction applications stall.
• •LRBA structure: the bare trust arrangement must be correctly established before settlement. Lenders require the bare trustee to be a separate entity from the fund trustee.
• •LVR: capped at 80% under the SIS Act for residential property. Commercial property LVRs are typically lower. Joseph Farhat will confirm what is achievable for your fund and property type.
• •Member contributions and fund income: the fund must demonstrate it can service the loan. Lenders assess both the fund's current income and projected rental return from the completed property.
• •Investment strategy alignment: the construction purpose must be consistent with the fund's documented investment strategy. Lenders and auditors will review this.
• •Personal income: most specialist lenders still assess the member's personal income where the fund income alone does not fully service the debt.
• •Builder contract: a fixed-price contract with a licensed builder is required. Owner-builder arrangements are not accepted within an SMSF structure.

The SMSF Construction Loan Process: What to Expect

1. 1.Initial review: Settled Funding Group assesses the SMSF structure, trust deed, fund financials, and build plan. Joseph Farhat confirms which specialist lenders are likely to support the application before anything is formally submitted.
2. 2.Bare trust and LRBA documents prepared by the fund's solicitor. Lenders will not proceed until this structure is in place and documented correctly.
3. 3.Full application lodged with the specialist lender: trust deed, SMSF financials, member contributions, builder contract, and property details.
4. 4.Lender assessment and approval, typically two to four weeks from submission with a specialist non-bank lender.
5. 5.Staged construction drawdowns managed by Settled Funding Group throughout the build. At completion, the property is held within the SMSF bare trust structure until the loan is discharged.

Indicative Finance Options

SMSF Construction Loan Broker

SMSF construction lending is one of the most restricted niches in the market. Many banks will not write construction loans inside a self-managed super fund at all, and the lenders who do apply strict rules on the limited recourse borrowing arrangement, the bare trust structure, LVR caps, and how the build is funded under super law. Getting the structure wrong can stall or unwind a deal. Applying to lenders who do not fund SMSF construction wastes time and adds avoidable credit enquiries. A broker who knows which lenders actually write SMSF construction loans, and how they want the LRBA structured, goes straight to those with appetite, including non-bank and specialist funders that trustees cannot approach directly.

Settled Funding Group represents you, the trustee and borrower, not the lender. Joseph Farhat reviews your fund structure, your LRBA, your bare trust, and your build, then matches the scenario to the right lender from our 90+ panel and negotiates terms on your behalf. For complex SMSF structures or unique scenarios, we can introduce you to private finance options. We prepare and manage the application end to end, working alongside your accountant and adviser. As a broker, we are typically paid by the lender on settlement, so in most cases there is no direct cost to you. If your fund wants to build and you are unsure where it sits, talk to us early and we will tell you honestly what is achievable.