What is a Limited Recourse Borrowing Arrangement (LRBA)?
A Limited Recourse Borrowing Arrangement — commonly called an LRBA — is the only legal way for a self-managed super fund (SMSF) to borrow money to purchase an asset. It is a specific structure required by superannuation law to protect the SMSF's other assets if the loan defaults.
Why "limited recourse"?
In a normal loan, if you default, the lender can pursue all your assets to recover the debt. An LRBA is "limited recourse" because the lender can only recover the specific asset purchased with the loan — not the other assets held in the SMSF. This protects the retirement savings of fund members.
How an LRBA works
What can an LRBA purchase?
An LRBA must be used to purchase a "single acquirable asset":
- A single real property
- A single parcel of shares
- A single asset with all parts that form a distinct commercial whole
Restrictions on SMSFs with LRBAs
- No improvements that fundamentally change the asset (major renovations that alter the character of the property are restricted during the loan period)
- The "related party" rules on buying from and leasing to members apply
- All transactions must be at arm's-length market value
Legislated changes
New SMSF LRBAs for residential property are banned under the legislated 2026 reform package after a commencement date. Commercial property LRBAs remain available. Existing residential LRBAs are grandfathered.