When to Use Your Super for a Unit Purchase

Your super balance compounds while you work extended shifts.

A Limited Recourse Borrowing Arrangement lets you use that balance to purchase a residential unit through your Self-Managed Super Fund without dipping into your monthly income. The property sits inside the fund, rental income flows to your super, and the loan sits off your personal borrowing capacity. For Extended Care Paramedics with strong super balances and long-term views, this structure turns retirement savings into tangible property without competing for serviceability alongside your home or investment loans.

What a Limited Recourse Borrowing Arrangement Does

A Limited Recourse Borrowing Arrangement is the only structure that lets your SMSF borrow to purchase property. The unit is held in a bare trust until the loan is repaid, then transferred into the fund. If the loan defaults, the lender can only claim the property itself, not other fund assets or your personal income. That protection is mandatory under superannuation law and gives the structure its name.

The loan must meet the sole purpose test, which means the property exists solely to provide retirement benefits. You cannot live in it, holiday in it, or rent it to a related party. The unit must be leased at market rates to an arm's length tenant.

SMSF Loan Deposit Requirements and LVR Limits

Most lenders cap the loan-to-value ratio at 80 percent, which means your SMSF needs at least 20 percent of the purchase price plus settlement costs in cash. Some lenders will go to 70 percent LVR, particularly for units, because they view strata properties as higher risk than freestanding houses. Your fund balance needs to cover the deposit, stamp duty, legal fees, and any trustee or bare trust setup costs before settlement.

Consider a scenario where your SMSF holds $180,000 and you want to purchase a unit in a mid-density block near a hospital precinct. At 80 percent LVR, you could borrow up to around $144,000, putting the purchase price at $180,000. After accounting for stamp duty and settlement costs, the fund balance would need to stretch to cover both the deposit and transaction expenses. If the numbers are tight, you might need to wait for the next round of contributions or drop the LVR target to match the available cash.

SMSF Loan Interest Rates and Loan Structure

SMSF property loan rates sit higher than standard home loan rates. Expect a margin of 1 to 2 percent above a typical variable rate, reflecting the limited recourse and the smaller pool of lenders willing to offer these products. You can choose variable or fixed, though fixed terms are often shorter and less flexible than conventional mortgages.

The loan is serviced from rental income wherever possible. If rental income falls short, your SMSF will need to make up the gap using contributions or existing cash reserves. The fund cannot borrow further to cover loan repayments, so cash flow planning is essential. We regularly see paramedics with strong super balances underestimate the ongoing contribution requirements when rental vacancy or strata levy increases eat into projected income.

When a Unit Works Inside Your SMSF

Units suit SMSF purchases when your priority is stable rental yield over capital growth speculation. They tend to be lower maintenance than houses, and strata levies cover building insurance and common area upkeep. For Extended Care Paramedics working variable rosters, that hands-off structure aligns with limited time for property management.

Location still drives yield. A two-bedroom unit near a major hospital or university precinct will attract consistent tenant demand from contract health workers or students. Avoid units in oversupplied precincts where vacancy rates spike, because your SMSF cannot afford extended periods without rental income if the loan still needs servicing.

SMSF Rental Income and Tax Treatment

Rental income inside your SMSF is taxed at 15 percent during the accumulation phase, which is lower than most paramedic marginal tax rates. Once the fund enters pension phase, that income becomes tax-free. If you hold the unit for more than 12 months and sell it during accumulation, any capital gain is taxed at 10 percent after applying the one-third discount. If you sell during pension phase, there is no capital gains tax.

That tax structure makes long hold periods effective. A unit purchased now and held through to retirement can deliver decades of concessionally taxed income, then transition to tax-free income once your super moves into pension mode. The flip side is that losses cannot be offset against your personal income, and negative gearing does not apply inside the fund. The SMSF must be self-sufficient.

Comparing SMSF Lenders and Application Requirements

Not all lenders offer SMSF loans, and those that do have different risk appetites for units versus houses. Some will not lend on units in buildings with commercial ground floors or high investor concentration. Others restrict loan size or require the fund to have a minimum balance before they will consider an application.

The application process involves both the SMSF trustee and the individual members. The lender will assess the fund's ability to service the loan based on rental income, projected contributions, and existing cash reserves. You will need an up-to-date trust deed, a bare trust deed, a property valuation, and evidence that the purchase complies with superannuation law. Working with an SMSF mortgage broker who understands compliance requirements prevents delays and ensures the structure is set up correctly from the start.

How This Fits Alongside Your Other Borrowing

Because the loan sits inside your SMSF and is limited recourse, it does not appear on your personal credit file and does not reduce your borrowing capacity for a home loan or investment loan. That separation lets you purchase property through your super without affecting your ability to refinance or buy another property in your own name.

That said, your ability to contribute to the SMSF may be limited by your personal cash flow. If you are already servicing a mortgage and an investment loan, adding regular contributions to top up the SMSF for loan repayments can stretch your budget. The structure works when your super balance is large enough to fund most of the ongoing costs from rental income and existing reserves, not when it requires constant cash injections from your take-home pay.

Call one of our team or book an appointment at a time that works for you. We will assess your fund balance, run the numbers on the unit you are considering, and connect you with lenders who understand how Extended Care Paramedic income and super contributions fit into an SMSF loan application.

Frequently Asked Questions