Refinancing an SMSF loan means entering a new loan contract for the same property, whether you stay with your current lender or switch to a new one.
The property must still meet the conditions that applied when you first borrowed. If you set up the loan before 10 August 2026, you can refinance without the property needing to be business real property. If you entered the loan on or after that date, the property must meet the business real property definition at all times during the loan, including after refinancing. Lose that status and your fund breaches super law.
Serviceability for an SMSF refinance is assessed on the fund's rental income, not your personal FIFO income. Lenders look at whether the property can service the debt from its own cash flow, then factor in the fund's other income sources if needed. Your diesel mechanic wages do not enter the calculation unless you are also making member contributions large enough to cover shortfalls, and even then the lender will apply strict tests around sustainability.
How Lenders Assess Rental Serviceability for SMSF Loans
Lenders assess rental serviceability by taking the property's current lease income and shading it by 20 to 30 per cent to allow for vacancy and management costs. They then compare that shaded figure to the proposed loan repayments at an assessed rate, which is typically your actual rate plus a buffer of 2.5 to 3 per cent.
Consider a commercial property leased at $60,000 per year. The lender shades that to $42,000 after a 30 per cent haircut. If the proposed loan repayments at the assessed rate are $50,000 per year, the rental income alone does not cover the debt. The lender will then review the fund's other income streams, such as employer contributions, member contributions, or income from other assets. If the fund holds multiple properties and one is negatively geared, the positive cash flow from others can offset the shortfall, but lenders assess each security individually before aggregating.
SMSF loans are non-recourse to the fund's other assets under the limited recourse borrowing arrangement. That structure limits the lender's security, so they price and assess more conservatively than they would for a standard investment loan. Rates are typically 0.5 to 1 per cent higher than owner-occupier home loan rates, and maximum loan-to-value ratios sit around 70 to 80 per cent depending on the lender and property type.
Why FIFO Income Structure Affects SMSF Contribution Capacity
Your capacity to make ongoing contributions to the fund matters when rental income does not fully cover the loan. Lenders want proof that you can sustain those contributions over the life of the loan, not just for the next 12 months.
FIFO income is high but variable depending on roster patterns, overtime and site shutdowns. A heavy diesel mechanic on a 14/7 roster earning $160,000 annually might have strong cash flow during active rosters, but a lender assessing your contribution capacity will shade irregular components of that income when calculating what you can reliably commit to the fund each year. If your overtime and allowances make up 40 per cent of your total income, the lender may only count 80 per cent of those components, reducing your assessed income and therefore your sustainable contribution capacity.
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Concessional contribution caps also limit how much you can put into the fund each year without triggering additional tax. For the current financial year, the cap is $30,000. If your employer already contributes $15,000 through superannuation guarantee and salary sacrifice, you have $15,000 of cap space left for voluntary concessional contributions. Non-concessional contributions have a separate cap, but they are made from after-tax income and do not help with loan serviceability in the same way because the lender is assessing pre-tax cash flow.
Lenders will not approve a refinance if the fund cannot demonstrate reliable serviceability over the full loan term. They assess whether the combination of rental income, existing fund assets, and your capacity to make ongoing contributions creates a sustainable position. If the rental income falls short and your contribution capacity is marginal, the refinance will not proceed unless you reduce the loan amount, extend the term, or bring in additional equity.
When Refinancing Creates a New LRBA
Refinancing ends the old borrowing arrangement and starts a new one. That means the new loan must comply with the rules that apply at the time you refinance, not the rules that applied when you first borrowed.
If your original loan was entered into before 10 August 2026 and the property is residential, you can refinance that loan on or after 10 August 2026 without the property needing to be business real property, provided the refinanced loan is secured by the same asset and the amount borrowed is equal to or less than the outstanding balance. If you increase the loan amount or change the security, the new borrowing may fall under the post-10 August 2026 rules, which require business real property for all new LRBAs involving real estate.
A variation to the loan terms does not always create a new borrowing. Switching from variable to fixed, extending the loan term, or adjusting repayment frequency might be permitted as a variation under the original loan contract. Whether a change is a refinancing or a variation depends on the nature and extent of the change and the intention of the parties. If the original loan agreement allowed for variations and the updated terms do not fundamentally alter the arrangement, it may remain under the original LRBA. If a new loan contract is signed, it is a refinancing.
You cannot refinance into a higher loan amount to access equity for another purchase under the LRBA rules. Each LRBA is limited to acquiring a single acquirable asset, and borrowed funds cannot be used to improve the asset beyond maintenance and repairs. Refinancing to release equity would breach the single asset rule and the prohibition on using borrowed funds for improvements. If you want to access equity, the only compliant path is to pay down the loan, transfer the asset to the fund, and then separately consider whether the fund can purchase another asset under a new LRBA.
What Happens When Your Fixed Rate Expires on an SMSF Loan
When a fixed rate expires, your loan reverts to the lender's standard variable rate unless you refinance or negotiate a new fixed term. The revert rate on an SMSF loan is typically higher than a residential home loan revert rate because SMSF loans are priced as investment lending with an additional margin for limited recourse risk.
If your fixed rate was 5.5 per cent and the revert rate is 7.2 per cent, your repayments increase immediately. On a $400,000 loan with 20 years remaining, moving from 5.5 per cent to 7.2 per cent lifts monthly repayments by around $600. The rental income that previously covered the loan may no longer be sufficient, and the fund will need to draw on contributions or other income to meet the shortfall.
Refinancing before the fixed term ends lets you lock in a new rate and avoid the revert rate, but break costs may apply if you exit early. Break costs are calculated based on the difference between your fixed rate and the wholesale rate the lender can now earn on the money for the remaining fixed period. If rates have fallen since you fixed, the break cost can be substantial. If rates have risen, the break cost is usually nil or minimal. You need to compare the break cost against the interest savings from refinancing to determine whether moving early makes sense.
For more detail on how break costs work and when they are worth paying, the fixed rate expiry page covers the calculations and timing considerations that apply to both home loans and SMSF loans.
Related Party Lenders and Arm's Length Terms
A related party can lend to your SMSF, but the loan must operate on arm's length terms and the interest rate cannot exceed what an independent commercial lender would charge for a comparable loan.
The ATO expects you to document the loan properly and be able to demonstrate that the rate and terms reflect a genuine commercial arrangement. PCG 2016/5 sets out the safe harbour terms for related party LRBAs. If you stay within those terms, the ATO will generally accept the arrangement as arm's length. If you move outside them, you need to be able to justify the terms with objective data.
If the loan is not on arm's length terms, the income derived from the asset may be classified as non-arm's length income and taxed at 45 per cent instead of the concessional rate of 15 per cent. The same treatment applies if the loan terms are varied during the arrangement in a way that is not arm's length, including during a refinancing.
Refinancing a related party loan to a commercial lender removes the arm's length compliance risk, but it also removes flexibility around repayment terms and rates. A commercial lender will not accept delayed or irregular repayments, and they will not adjust the rate based on your fund's cash flow position. For a fund with strong rental income and reliable contribution capacity, refinancing to a commercial lender can reduce administration and audit risk. For a fund with variable cash flow or complex asset holdings, the flexibility of a related party loan may be more valuable than the slightly lower rate a commercial lender might offer.
Does Your Total Super Balance Include the LRBA Loan?
From 30 June 2026, your total super balance calculation includes your share of the outstanding LRBA loan balance in certain circumstances. If the LRBA was entered into on or after 1 July 2018 and the lender is either a related party or you have met a condition of release with no cashing restriction, the loan balance is included in your total super balance. Some LRBAs entered into before 1 July 2018 and refinanced on or after that date are also included, unless the refinanced loan is secured by the same asset and the loan amount is the same or less.
Your total super balance affects your eligibility for certain super strategies, including non-concessional contributions and carry-forward concessional contributions. If your balance exceeds $1.9 million, you cannot make non-concessional contributions. If it exceeds $500,000, your concessional contribution cap does not increase under the carry-forward rules.
If your SMSF holds a property with an outstanding loan of $300,000 and your share of the fund is 50 per cent, $150,000 is added to your total super balance. That amount is not a liability you can offset against your member balance for total super balance purposes. It increases your measured balance, which can push you over a threshold and restrict your contribution options. Refinancing does not change this treatment unless the refinance results in the LRBA no longer meeting the conditions for inclusion, which is rare.
Understanding how the LRBA affects your total super balance is important before refinancing, particularly if you are close to a threshold. Paying down the loan reduces the outstanding balance and therefore reduces the amount included in your total super balance, but refinancing to a higher amount or to a related party lender can increase it.
Choosing Between a Specialist SMSF Broker and a General Broker
Not all brokers write SMSF loans. The compliance requirements, documentation, and lender panel differ from residential lending, and the refinance process involves coordinating with your fund's accountant, auditor, and solicitor to ensure the new loan structure meets super law.
A specialist SMSF refinance broker understands how to assess rental serviceability in the context of limited recourse lending, how to structure the holding trust, and which lenders will accept your property type and fund structure. They also understand how FIFO income affects your contribution capacity and how to present that to a lender in a way that supports the application rather than raising questions.
General mortgage brokers typically refer SMSF inquiries to a specialist because the lender panel for SMSF loans is smaller and the documentation requirements are more detailed. If your loan involves a related party lender, a commercial property, or a refinance that increases the loan amount, the complexity increases further and a specialist becomes necessary rather than optional.
When refinancing an SMSF loan, start by confirming that the property still meets the conditions for the LRBA, then review the rental serviceability and your contribution capacity. Call one of our team or book an appointment at a time that works for you.
Frequently Asked Questions
Can I refinance an SMSF loan using my FIFO income for serviceability?
No. Lenders assess SMSF loan serviceability based on the property's rental income and the fund's other income sources, not your personal FIFO wages. Your income only matters if you are making ongoing member contributions to cover a shortfall, and the lender will assess whether you can sustain those contributions long-term.
Does refinancing an SMSF loan create a new limited recourse borrowing arrangement?
Yes. Refinancing ends the old borrowing arrangement and starts a new one, which must comply with the LRBA rules that apply at the time of refinancing. If your original loan was set up before 10 August 2026, you can usually refinance without the property needing to be business real property, provided the loan amount is equal to or less than the outstanding balance.
What happens to my SMSF loan when the fixed rate expires?
Your loan reverts to the lender's standard variable rate, which is typically higher than a residential revert rate. The rental income may no longer cover the repayments, requiring the fund to draw on contributions or other income to meet the shortfall. Refinancing before expiry avoids the revert rate but may involve break costs if you exit the fixed term early.
Is the SMSF loan balance included in my total super balance?
Your share of the outstanding LRBA loan balance is included in your total super balance if the loan was entered into on or after 1 July 2018 and the lender is a related party, or if you have met a condition of release with no cashing restriction. This inclusion can affect your eligibility for certain contribution strategies.
Can I refinance an SMSF loan to a higher amount to access equity?
No. Each LRBA is limited to acquiring a single asset, and borrowed funds cannot be used to improve the asset or purchase another one. Refinancing to release equity would breach the single asset rule. To access equity, you must pay down the loan, transfer the asset to the fund, and consider a separate LRBA for another purchase.
