Most of the attention on SMSF property lending goes to the deposit, usually 20 to 30% of the purchase price, and the interest rate. What gets far less attention is that an SMSF loan structure keeps generating costs long after settlement, some of them every single year, whether the property has a tenant or not.
Why an SMSF loan costs more to run than a personal one
A standard investment loan in your own name has one ongoing cost most people already understand: the repayment. An SMSF loan sits inside a structure built specifically to satisfy superannuation law, and that structure itself has running costs separate from the loan.
This is because an SMSF cannot hold a geared property directly. It has to be held through a limited recourse borrowing arrangement (LRBA), where a separate bare trust and custodian trustee hold legal title to the property on the fund’s behalf. Setting up and maintaining that structure is where most of the extra cost sits.
What the structure itself costs to maintain
Establishing the bare trust and corporate trustee typically costs somewhere between $1,500 and $3,000 upfront, depending on whether a company is set up as trustee or an existing one is used. That’s a one-off cost, but it’s often higher than buyers expect going in.
The ongoing costs are where the structure keeps billing the fund. Corporate trustee ASIC fees currently sit at around $60 to $70 a year for a special purpose company (this is indexed and changes slightly each year), on top of the SMSF’s own annual ATO supervisory levy, which has sat at $259 in recent years. SMSF audit fees, which are compulsory every year regardless of fund size, typically run from $500 to $1,500 depending on the complexity of the fund and how many properties or other assets it holds.
Can these costs be paid from outside super?
Generally no. Costs directly related to running the SMSF and its LRBA, such as the audit, the corporate trustee fee and accounting for the fund, are usually paid from the SMSF’s own bank account, not personally by the members. Paying them personally can raise compliance issues with the ATO, so this is worth confirming with an accountant who specialises in SMSFs.
The accounting and compliance load is heavier too
An SMSF with a property and an LRBA generally needs more detailed annual accounting than a simple SMSF holding shares or cash. Expect SMSF accounting fees in the $1,500 to $3,500 range each year once a geared property is in the mix, compared to closer to $1,000 to $1,500 for a simple fund without borrowing.
Property-specific costs stack on top of this in the same way they would for any investment property: council rates, insurance (which usually needs to be held in the fund’s name, not the trustee’s, depending on the lender), land tax where it applies, and property management fees if the property is tenanted. None of these are unique to SMSF lending, but they still have to be paid from the fund’s limited cash reserves.
How this compares to a standard investment loan
A personally-held investment property doesn’t need a bare trust, a corporate trustee, or a compulsory annual audit. Those structural costs, often $2,000 to $5,000 a year combined once accounting, audit and trustee fees are added up, are the real premium an SMSF pays for the tax benefits and asset protection the structure provides.
Whether that premium is worth paying depends on the size of the fund, the fund’s other assets, and each member’s personal tax position, which is a conversation best had with a financial adviser or accountant rather than decided from a rule of thumb. As a general guide, funds with a total balance well below $200,000 to $250,000 often find the fixed costs eat too heavily into returns to make an LRBA worthwhile.
Budgeting for the real running cost
Before committing to an SMSF loan, it’s worth building a full annual budget that includes the loan repayments, the audit and accounting fees, the ASIC and ATO levies, and the property’s own holding costs. Lenders assess serviceability on the loan itself, but they don’t budget the structure’s running costs for you.
A fund with tight cash flow can end up needing extra member contributions just to cover the compliance costs in a year with unexpected repairs or a vacancy. Building a buffer into the fund’s cash position before settlement avoids that scramble later.
Key Takeaways
- An SMSF loan requires a bare trust and corporate trustee, which adds ongoing costs a standard investment loan doesn’t have.
- Compulsory annual SMSF audit fees typically run $500 to $1,500, on top of the ATO’s $259 annual supervisory levy.
- SMSF accounting fees are usually higher once a geared property is added, often $1,500 to $3,500 a year.
- These structural costs are generally paid from the fund itself, not personally by the members.
- Budgeting for compliance costs and holding costs together, not just the loan repayment, avoids cash flow surprises.