Many SMSF property loans don’t come from a bank. They come from the members themselves or a family company. These are related-party loans, and the ATO has specific rules for them.
Get them wrong and your fund’s income could be taxed at 45%.
What is a related-party SMSF loan?
It’s a limited recourse borrowing arrangement (LRBA) where the lender is a member of the fund, a relative, or a company or trust they control, rather than a bank or other lender.
Related-party loans became common when banks tightened SMSF lending. They can be flexible and quick to set up. But the terms have to be on an arm’s length basis, as if the lender were a stranger.
What is the ATO safe harbour rate?
The ATO publishes safe harbour terms in its Practical Compliance Guideline PCG 2016/5. If a related-party loan meets them, the ATO accepts it’s on arm’s length terms.
For loans secured by real property, the safe harbour interest rate is based on the Reserve Bank’s standard variable rate for investor housing loans:
Financial Year
Safe Harbour Rate (Real Property)
2026–27
9.35%
2025–26
8.95%
The safe harbour terms for real property also set limits on:
- The maximum loan-to-value ratio (70%)
- The maximum loan term (15 years)
- Repayments (monthly principal and interest)
- Security (a registered mortgage over the property)
- Documentation (a written loan agreement).
What happens if my related-party loan doesn't meet the safe harbour?
If the terms are more generous than an arm’s length lender would give, for example a lower rate or interest-only repayments, the property’s income may be treated as non-arm’s length income (NALI). NALI is taxed at 45% instead of the usual 15% rate for super funds.
You don’t have to use the safe harbour terms, but if you don’t, you need to show the loan is on terms a real lender would offer. That’s harder to prove.
Do I need to update the rate every year?
If your related-party loan has a variable rate, it needs to move to the new safe harbour rate each financial year. For 2026–27 that’s 9.35%, up from 8.95%.
Check that your loan agreement allows for this and that the new rate is actually being charged and paid.
Is a related-party loan still the best option?
This is worth asking now. At 9.35%, the safe harbour rate may be higher than what an external lender would charge your fund. That higher interest goes from your super to the lender.
Refinancing to a bank or non-bank lender could:
- Lower the rate your fund pays
- Remove the yearly safe harbour compliance work
- Free up the related party's money.
But it’s not right for everyone. External lenders have their own requirements, and the August 2026 rules on residential borrowing need to be considered. See [Can I still refinance my SMSF loan?].
Can I still set up a new related-party loan?
For commercial property, yes, as long as it’s on arm’s length terms. For residential property, new LRBAs have been banned since 10 August 2026.
Don’t assume a loan from a family member gets around this. Get advice before setting anything up.
How RK can help
Related-party loans are where SMSF accounting and lending overlap most. Our SMSF accountants check that your loan meets the ATO’s terms. Our finance team can show you what an external lender would offer, so you can compare the two properly.
Have a related-party loan in your SMSF? Book a free 20-minute chat and we’ll look at both options with you.
Still got questions?
call us on (03) 9802 2533
Email us: info@rogersonkenny.com.au to talk through your options.
*Disclaimer: This article is general information only and does not take into account your personal circumstances. Always seek professional advice before making financial decisions.*
Sources: ATO PCG 2016/5 safe harbour rates (https://www.icaresmsf.com.au/smsf-lrba-safe-harbour-interest-rates-2026-27/); SMSF Adviser (https://www.smsfadviser.com/news/24588-check-lrbas-after-safe-harbour-rate-update-educator). Rates checked 9 Nov 2026.
General information only. It doesn’t take your personal circumstances into account. Rogerson Kenny Finance Pty Ltd ACN 672924382 is authorised under LMG Broker Services Pty Ltd Australian Credit Licence 517192.
