Your SMSF loan can be refinanced the same way a standard home loan can.
You can switch to a new lender or renegotiate with your existing lender. Both options can reduce your repayments, but the circumstances that make one option better than the other are specific to your fund, your property, and the type of loan you hold.
Why refinance your SMSF loan at all
Lenders treat SMSF loans differently to standard residential loans. Rates are typically higher, offset accounts are uncommon, and if you're sitting on a rate that hasn't been reviewed in a year or more, you're likely paying well above what's available now.
Consider a fund that borrowed $650,000 at a fixed rate three years ago to acquire a commercial property in a Perth industrial estate. That fixed term expires next month and the loan will revert to the lender's standard variable rate, which currently sits around 1.5% above what competitor lenders are offering for SMSF commercial loans. Over a 15-year term, that difference costs the fund roughly $110,000 in additional interest.
That's the cost of inertia. Trustees often assume refinancing an SMSF loan involves the same compliance risk as setting up a new limited recourse borrowing arrangement from scratch. It doesn't, provided the refinance relates to the same asset and maintains the limited recourse character of the original loan.
Switching lenders vs renegotiating with your current lender
Switching lenders gives you access to the full market. If your current lender won't move on rate, or doesn't offer offset accounts, or has stopped writing SMSF loans altogether, switching lets you take advantage of what's available elsewhere.
Renegotiating with your current lender is faster and cheaper. You avoid discharge fees, application fees, and the time required to submit a full SMSF loan application to a new lender. If your existing lender is still competitive and willing to adjust your rate, staying put makes sense.
The decision comes down to three things: the rate your current lender will offer if you ask, the rate available elsewhere, and whether you need features your current lender doesn't provide.
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What changed in the SMSF loan market in August
New rules commenced on 10 August this year that prevent SMSFs from using limited recourse borrowing arrangements to acquire residential property. The Treasury Laws Amendment (Tax Reform No. 1) Act received Royal Assent in June and the ATO confirmed the commencement date as 10 August.
If your fund has an existing residential LRBA that was in place before that date, you can still refinance it. The ATO considers refinancing to mean entering into a new loan contract for the same asset, with the same or a new lender. Arrangements that existed before 10 August are not subject to the new rules when refinanced, provided the refinance doesn't trigger a circumstance that ends the original arrangement.
Circumstances that end an arrangement include refinancing that is inconsistent with the terms of the original arrangement, borrowing to acquire an asset not contemplated under the original arrangement, and changes to the ultimate beneficiaries of the arrangement. If the refinance ends the original arrangement and a new one begins on or after 10 August involving residential property, it cannot proceed.
Commercial LRBA refinancing is not affected by the changes. A fund holding a warehouse, office, or industrial property can refinance with a new lender or renegotiate with the existing lender without restriction, provided the refinanced loan relates to the same single acquirable asset and maintains limited recourse.
When switching lenders makes sense
Switching lenders is worth the cost and time when the rate difference is material, when your current lender won't negotiate, or when you need a feature your current lender doesn't offer.
A FIFO worker with a fund holding a $420,000 commercial unit in Mackay had a loan with a lender that didn't offer offset accounts for SMSF loans. The fund was generating rental income that sat in the fund's operating account, taxed at 15%, while the loan balance remained untouched. By switching to a lender that allowed a genuine offset account, the trustee could park rental income in the offset and reduce the interest charged on the loan without triggering non-arm's length income issues. The offset reduced the effective interest cost by around $4,200 a year.
Offset accounts offered by an authorised deposit-taking institution are not treated as a borrowing or a charge over fund assets under ATO guidance. They're a legitimate tool for managing cash flow within a fund, particularly where rental income accumulates between distribution periods.
If your current lender has stopped writing SMSF loans or is no longer competitive on rate, switching is the only option that keeps your fund's borrowing costs in line with the market.
When renegotiating with your existing lender works better
If your current lender is still active in the SMSF loan market and offers competitive rates, asking them to review your rate is faster and less disruptive than switching.
Renegotiating avoids discharge fees, which can run between $300 and $800 depending on the lender, and avoids application and settlement fees with a new lender. It also avoids the time required to prepare and lodge a full loan application, which for an SMSF loan includes trust deed review, compliance checks, and verification that the arrangement meets arm's length terms under PCG 2016/5.
The ATO publishes safe harbour interest rates for SMSF limited recourse borrowing arrangements under that guideline, updated annually. The rates apply to both real property and listed securities. If your loan doesn't meet arm's length terms, income from the arrangement may be assessed as non-arm's length income and taxed at 45%.
Lenders know that SMSFs can refinance and will often adjust rates to retain the loan, particularly where the loan balance is substantial and the fund has a clean repayment history. If your existing lender quotes a rate within 0.2% of what's available elsewhere and you don't need additional features, staying put is usually the better call.
How to approach a rate review with your current lender
Call your lender and ask what rate they can offer if you refinance the loan internally. Don't ask for a small discount. Ask them to match what you've been quoted elsewhere or explain why they can't.
Have a written quote from another lender ready before you make the call. Lenders take rate review requests more seriously when they know you've done the work to compare. If your current lender won't move or quotes a rate that's still well above market, you switch.
If they do offer a competitive rate, confirm the offer in writing, check that no other loan terms change, and ask whether the revised rate applies for a fixed period or reverts after a certain time. Some lenders offer a discounted rate for 12 months and then revert to a higher margin. That's not a long-term solution.
What a specialist SMSF broker does that a standard broker doesn't
Most mortgage brokers don't work with SMSF loans. The compliance requirements are different, the lender panel is smaller, and the loan structures don't fit the standard residential lending process.
A specialist SMSF refinance broker knows which lenders write SMSF loans, which offer offset accounts, and how to structure the application so it meets both the lender's credit policy and the ATO's compliance guidelines. They'll also know whether your current lender is still competitive or whether switching will save your fund a material amount over the life of the loan.
For FIFO workers, most brokers also don't understand how to present rostered income in a way that maximises serviceability. If you're refinancing and your income structure has changed since the original loan was written, a broker who works with FIFO clients regularly will know how to document that income correctly so it's not shaded more than it should be. For more on how FIFO income is assessed across different loan types, see FIFO Property loans.
Refinancing an SMSF loan isn't a set-and-forget decision. Rates move, lenders change policy, and the difference between staying put and switching can be significant. Whether you renegotiate or switch depends on what your current lender will offer, what's available elsewhere, and whether you need features your current loan doesn't have. If you're not sure where your fund's loan sits relative to the market, call one of our team or book an appointment at a time that works for you.
Frequently Asked Questions
Can I refinance an existing residential SMSF loan after the August 2026 rule changes?
Yes, if your residential limited recourse borrowing arrangement was in place before 10 August, you can refinance it with the same or a new lender. The new rules do not apply to arrangements that existed before that date, provided the refinance doesn't end the original arrangement.
When does switching SMSF lenders make more sense than renegotiating?
Switching makes sense when the rate difference is material, your current lender won't negotiate, or you need features like an offset account that your current lender doesn't offer. Renegotiating is faster and cheaper if your current lender is competitive and willing to adjust your rate.
Are offset accounts allowed on SMSF loans?
Yes, genuine offset accounts offered by an authorised deposit-taking institution are allowed and are not treated as a borrowing or charge over fund assets under ATO guidance. They can be used to reduce interest costs without triggering non-arm's length income issues.
What happens if my SMSF loan doesn't meet arm's length terms?
If your SMSF loan doesn't meet arm's length terms under PCG 2016/5, income from the arrangement may be assessed as non-arm's length income and taxed at the highest marginal rate of 45%. This applies to both new and refinanced loans.
Do I need a specialist broker to refinance an SMSF loan?
Most standard mortgage brokers don't work with SMSF loans due to compliance requirements and a smaller lender panel. A specialist SMSF broker knows which lenders write these loans, how to structure applications for compliance, and how to present FIFO income to maximise serviceability.
