SMSF Commercial Property Loans: Buy Your Premises
Key Takeaways Every month, your business pays rent into someone else’s asset. Meanwhile your self-managed super fund (SMSF) holds a balance in shares and cash, and the premises you have worked from for years come up for sale. A fund can borrow to buy commercial premises and lease them straight back to the business occupying them, an arrangement superannuation law permits for business real property and blocks for residential. Since 10 August 2026, the field has narrowed further, and business real property is the only real property a fund can borrow to acquire under a new arrangement. Because the test turns on use rather than zoning or description, some commercial premises fall outside it and some residential-style buildings fall inside. Whether your premises meet that test is the first question an SMSF loan broker asks, because a property that fails it cannot be financed this way at all. What Makes Premises Business Real Property Business real property is defined in section 66(5) of the Superannuation Industry (Supervision) Act as real property used wholly and exclusively in one or more businesses, whether carried on by the fund or not. Six things decide whether your premises clear that bar: Use Measured Across the Arrangement The Australian Taxation Office (ATO) states that the asset must be business real property at the time the limited recourse borrowing arrangement (LRBA) is entered into and for the entire life of that arrangement, and that a fund which does not meet this has breached the borrowing prohibition. Buying a shell you intend to fit out and trade from later puts the test at its weakest point, because the qualifying use has not started yet. Activities Recognised as Genuine Businesses The definition turns on a business being carried on, and not every activity qualifies. A hobby or the passive holding of one or two rental properties will generally fall short. The Commissioner looks at matters such as scale, permanency, profit intention and record keeping when deciding whether a business exists. Where your occupant is a trading operation with an Australian Business Number, staff and turnover, this rarely troubles anyone. Where it is a start-up yet to trade, it can. Dwellings Attached to Business Premises A shop with a flat above it, or a warehouse with a caretaker’s residence, is the classic failure. Private residential use is not business use, and the whole property carries one test. Space Shared With Private Purposes The Commissioner accepts other use where it is minor, insignificant or trifling, as set out in the business real property ruling. A storeroom holding a few personal items falls inside that. A floor used as a family residence does not. The judgement is one of degree, made on the facts of your building instead of on a percentage, so it is worth putting to your accountant before contracts are drawn. Vacancies Carried Between Tenancies A property standing empty when the arrangement is entered into is the difficult case, because there is no business use to point to at that moment. An established tenancy history helps, though it does not replace current use. Where your own business will occupy the premises, lenders and auditors will look at when the lease starts against when the arrangement begins. Titles Counted as Single Assets One arrangement finances one acquirable asset. Where your premises sit across two titles, they can generally only be financed under a single arrangement where they are physically or legally inseparable, such as a building straddling both lots or titles that cannot be dealt with apart. Two separable titles mean two arrangements, two holding trusts and two loans, which changes the cost of the purchase considerably. Leasing the Premises Back to Your Business Paragraph 71(1)(g) of the Superannuation Industry (Supervision) Act keeps a lease of business real property to a related party outside the in-house asset rules, which is what allows your own business to be the tenant. The concession depends on the terms holding up: Setting Rent at Market Value Section 109 requires the fund’s dealings to be on arm’s length terms. Rent below market is the most common way this arrangement fails, and the consequence is that the income may fall under the non-arm’s length income provisions in section 295-550 of the Income Tax Assessment Act 1997 and be taxed at 45% instead of the concessional 15% that normally applies to fund income. Evidence a fund would usually hold includes: Requirements differ between auditors and lenders, so treat this as a general guide and confirm what your fund needs with your accountant. Documenting Lease Terms in Writing A written lease on commercial terms is the baseline, covering the term, the permitted use, the review mechanism and the obligations of each party. A handshake between you and your own company does not evidence an arm’s length dealing. The lease is also the document a lender assesses, and where the tenant is your business, expect it to be read closely alongside the rent appraisal. Reviewing Rent at Set Intervals A lease frozen at its opening rent drifts away from market as the years pass, and by year five the gap can be wide enough to attract attention. Building a review mechanism into the lease and then applying it is what keeps the arrangement defensible. Paying Rent Under Lease Terms Letting your business fall behind because cash flow is tight is not a dealing an unrelated landlord would accept, and the bank statements show it at audit. Where the business genuinely cannot pay, a documented variation on commercial terms is a different thing from silence. Allocating Outgoings Between Parties Rates, insurance, land tax, strata levies and repairs all have to sit with whichever party an unrelated tenant would expect to carry them. A lease that pushes every outgoing onto the fund while charging full market rent is not the deal an arm’s length landlord would sign. Charging Tax on Commercial Rent Commercial rent is a taxable supply, so a fund receiving it may need to register for goods
Renovation Loan or Construction Loan: Which Do You Need
Key Takeaways You have quotes, you have equity in the home, and the lender has started asking for council-approved plans and a fixed price contract. Nothing about a new kitchen felt like construction until that moment. Which product you end up with sits in lender credit policy, and it turns on what the work does to the building, whether the lender needs the finished value to make the numbers work, and how much of the loan is going into the build. Working out which side you land on before you sign a building contract is the part worth settling early, because the structure decides how the money reaches your builder and when. That is the first thing a construction loan broker checks when renovation plans come across the desk. The lender policies named here are examples only, current at the time of writing and subject to change without notice. What Pushes a Renovation Into Construction Lending Seven things move a job from a standard increase into a construction facility: Approvals Required for Structural Work New cabinetry, flooring, paint and a bathroom fit-out that leave the structure alone are usually funded as an increase on the existing loan. AMP Bank’s credit policy treats an extension or renovation involving structural changes that require council approval as a construction purpose. In New South Wales, that approval is either a development application through your council or a complying development certificate issued by a registered certifier. Valuations Based on Finished Value Where the lender needs the finished value to support the loan, the request becomes construction lending, whatever the work is called. Macquarie Bank’s credit guidelines state that home improvement or renovation loans relying on the on-completion value must be assessed as a construction loan, with the bank controlling the release of funds direct to the supplier on receipt of an invoice and a signed customer authority. Amounts Set by Lender Thresholds Dollar size pushes a file across on its own at some lenders. AMP requires a construction facility where the loan amount for construction is $100,000 or more. Macquarie sets a minimum construction loan of $150,000, so smaller jobs sit outside that product entirely and have to be funded another way. Land Values Measured Against Loan Size Macquarie’s policy allows equity release for structural renovations to remain a standard loan where the loan sits at or below 80% of the as-is valuation and does not exceed the land value of the security, with no building contract, council plans or progress drawdowns required. Two conditions still apply, being confirmation that a licensed builder is engaged for the structural work and the proposed build cost provided to the lender. On an established Sydney block where land carries most of the value, that pathway is often open. On a newer property where the dwelling carries most of it, often not. Dwellings Counted Under Development Limits Macquarie’s construction purpose covers the immediate building of up to two residential dwellings or renovations on an existing property, and it treats construction of more than two dwellings as development finance, which it lists as unacceptable. AMP finances a maximum of two dwellings simultaneously. A granny flat alongside the existing house sits inside that limit at both lenders. A third dwelling does not. Builders Engaged Under Fixed Price Contracts Macquarie requires the work to be performed by a fully licensed contracted builder and to commence within three months of the initial loan settlement. AMP excludes labour-only contracts, split contracts where the land contract names a specific builder, kit and relocatable homes, and non-arm’s length arrangements such as a family member’s building company working for a relative. Where your arrangement does not fit that shape, the construction product may be unavailable even though the work clearly is construction. Owner Builders Excluded From Policy Managing the build yourself takes the construction loan off the table at both lenders. Macquarie treats loans to owner builders as unacceptable, and AMP lists owner builders as an exclusion from construction lending. In New South Wales, an owner-builder permit is required where the reasonable market cost of labour and materials exceeds $10,000, with an approved education course required where the work is valued over $20,000. Funding an owner-built project usually means a standard release measured against as-is value. How Progress Payments Release the Money Under a construction loan, the money is released in pieces, against work a third party has confirmed is finished: Drawing Funds Against Completed Stages The building contract sets a schedule and the lender pays against it. Macquarie’s guidelines give a standard example of five stages: Five stages are standard and up to eight sit within Macquarie’s normal parameters. The bank checks that the schedule is not front-loaded, meaning no stage pays the builder more than the share of work actually completed by that point. Schedules and stage percentages differ by lender and by builder, so treat the figures above as a general guide. Contributing Borrower Funds Before Drawdown Your money goes in first. AMP requires the applicant’s own funds to be used before any bank loan funds are drawn, and requires the owner’s full equity at the initial land settlement on a knockdown rebuild. Borrowers who budgeted on the loan carrying the early stages are the ones caught by this, because the builder’s deposit often falls due before any of the facility is available. Ordering Inspections Before Stage Releases Someone independent confirms the stage is done. Macquarie requires valuer certification of only the first and final draws where the building contract is $600,000 or less, and a valuer inspection at every progress payment above that figure. AMP scales it by contract amount. Contracts up to $1.5 million need an as-if-complete valuation before the first payment and a final valuation at the end. Between $1.5 million and $2 million, an in-progress inspection at lock-up is added. Above $2 million, a quantity surveyor inspects at every stage, engaged at your cost. Testing Cost to Complete Against Undrawn Funds Before each release, AMP must be satisfied that
Cash Out Refinance: What Lenders Will Release Equity For
Key Takeaways Your property has gone up in value, you have a use in mind for part of that increase and the question you cannot settle is whether a lender will actually hand it over. Equity is rarely the sticking point. Purpose is. A cash out refinance replaces your existing home loan with a larger one and releases the difference to you. Lenders treat that released portion differently from the part that refinances your current debt, because the extra is new money going somewhere they have to be comfortable with. Two applicants with the same equity, income and property can get different answers based on nothing more than what the funds are for. Purpose also sets how much paperwork you produce and, in some cases, how much you can borrow at all. Mapping your intended use against published lender policy is the first thing an equity release broker does, well before an application is lodged. The lender policies named here are examples only, current at the time of writing and subject to change without notice. How Lenders Assess the Purpose of Released Equity Every cash out request is assessed on the use of the funds, the amount released and where the new loan sits against your property’s value. Those three interact, and a change in one moves the others: Purpose Stated at Application Macquarie Bank’s credit guidelines state that details of the purpose must be provided based on discussion with the borrower. A single word such as ‘personal’ rarely survives assessment, because the credit analyst needs a use and a figure against it. Where the funds cover more than one purpose, AMP Bank’s broker policy requires a statutory declaration itemising each purpose and its estimated cost. A vague answer usually produces a request for further information mid-assessment, which is where timelines slip. Evidence Thresholds Set by Lenders There is no industry-wide dollar figure at which documents become compulsory. AMP Bank accepts cash out of up to $500,000 on the declared purpose alone, to 90% of the property’s value, measured with or without mortgage insurance depending on the repayment type, provided negative gearing is not needed to assist servicing. Above $500,000 and up to $1,000,000, a statutory declaration and supporting documents are required, and anything beyond $1,000,000 is considered by exception. Macquarie sets no dollar limit on the cash out component at or below 80% of value, subject to the applicant’s risk profile, capacity and security, while still requiring the purpose to be established through discussion. Other lenders set a specific dollar trigger above which documents are mandatory regardless of the loan-to-value position, so the threshold worth knowing is the one belonging to the lender you are applying to. The figures above are a general guide only, drawn from published broker policy current at the time of writing, and lender policy can change without notice. Valuations Ordered Before Assessment The valuation sets the number every other limit is measured against. Depending on the property and the amount, it may be an automated valuation, a desktop assessment or a full inspection. Macquarie requires a full valuation where the loan exceeds 80% of value, and requires the valuation to be no more than 90 days old at submission and 180 days old at settlement, so a delayed application can trigger a second valuation at your cost. A figure below expectation can push the loan into a band where cash out is not permitted at all, which removes the release while leaving the refinance intact. Cash Out Limited Above 80% Below 80%, most lenders will consider the request on its merits. Above it, mortgage insurance or a low deposit fee usually applies, and the insurer’s appetite sits alongside the lender’s. Macquarie allows no cash out, equity release or debt consolidation above 80% and up to 90%, beyond a $5,000 allowance for costs. AMP permits cash out to 90% but caps the cash out component at 20% of the security value once the base loan passes 85%. A borrower with genuine equity on paper may still be told no, because the release itself would push the loan past the point where any release is permitted. Borrowing Power Tied to Purpose Purpose can change how much you can borrow, not only whether you can borrow. Macquarie’s negative gearing policy accepts the tax benefit on cash out where an executed purchase contract evidences the investment property, and declines it where the applicant wants funds released for a property not yet found or for general investment purposes. Under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which received Royal Assent on 26 June 2026, negative gearing will be limited from 1 July 2027 to new residential dwellings and to properties acquired before 7:30 pm Australian Eastern Standard Time (AEST) on 12 May 2026. Lenders have begun updating how they treat the benefit in servicing, and supporting guidance is still being released, so the borrowing capacity attached to an investment purpose may differ from what it was a few months ago. Loan Splits Used for Released Funds Released funds are commonly set up as a separate split from the refinanced balance, which keeps borrowings for different uses in separate accounts when interest has to be apportioned between deductible and private components. It also lets the released portion run on its own term, so a five-year purchase is not spread across 30 years. Splitting is decided at application, and unwinding it later usually means another application. Purposes Lenders Commonly Approve These uses appear on published acceptable-purpose lists, each with its own conditions: Renovations to Existing Dwellings Cosmetic work is usually treated as standard cash out. Where council approval is required, or where the lender would rely on an ‘on completion’ valuation, the request generally moves into construction lending with a fixed price contract, council-approved plans and staged drawdowns controlled by the lender. Macquarie allows equity release for structural renovations to remain a standard loan where the loan is at or below 80% of the as-is valuation and
Using Equity to Buy an Investment Property: Loan Structure
Key Takeaways Take 80% of what the home is worth, subtract the balance still owing, and what is left is the working number. It tells you whether the purchase is possible. It says nothing about how the borrowing should be arranged, and that is where using equity to buy an investment property either stays clean or turns into years of untangling. The existing home loan is topped up and the extra sits inside it. A new loan is split off and kept separate. Both properties are pledged to the one lender. Or the second loan goes somewhere else entirely. The paperwork looks similar in each case, and the loan amount can be identical. The difference surfaces at tax time, and again the day you want to sell one of the two properties. Sorting it out before the loan documents are drawn is far easier than restructuring afterwards, which is the conversation worth having with an equity loan broker while the numbers are still on paper. What Your Usable Equity Actually Funds Releasing equity does not buy the property. It funds the deposit and the costs that would otherwise come from savings, and a second loan does the rest. Six things set how far a release goes: The Deposit and Costs Drawn From Your Home Equity used for an investment deposit generally has to cover the 20% lenders look for, so the new loan sits at 80% of the property’s value. On a $900,000 purchase, that is $180,000 before a single fee is paid. A release for a Sydney purchase typically needs to cover: Amounts differ by lender, by purchase price and by property, so treat this as a general guide. The Loan Secured Against the New Property The remaining 80% is borrowed against the investment property itself. It is priced as investment lending, it is secured by the new title alone, and it stands or falls on the rental income and your capacity to service it. The Release Pushed Beyond 80% Going past 80% is possible with some lenders, at a price. Moneysmart, run by the Australian Securities and Investments Commission, notes that lenders mortgage insurance (LMI) is usually payable once the amount borrowed exceeds 80% of the property’s value, and that the cover protects the lender, not you or any guarantor. The premium attaches to whichever loan crosses the line, so a release that lifts your home to 88% can trigger a cost on the home side while the investment loan sits comfortably at 80%. The Limit Set by Repayment Capacity Valuation sets one ceiling. Servicing sets another, and it usually binds first. The Australian Prudential Regulation Authority (APRA) confirmed on 28 May 2026 that the mortgage serviceability buffer stays at three percentage points, so both loans are assessed at a rate well above the one you will pay. The same update kept debt-to-income limits in place, allowing banks to write up to 20% of new owner-occupied and investment lending at six times income or more, which is where higher earners with existing debt often find the ceiling. The Evidence Required for Larger Releases Lenders ask what the money is for, and above an amount each lender sets for itself, they ask for proof. That can mean a contract of sale or a declaration of intended use. A release described loosely may be reduced or declined, and the purpose recorded on the application is worth matching to what actually happens, since the same trail supports your deduction later. The Equity Left Untouched as a Buffer A valuation that comes in under expectation, or a soft patch in the local market, can push the combined position close to the lender’s limit and complicate any later application. Many buyers release less than the maximum for that reason, though how much room to leave depends on your income, your holding costs and how long you plan to keep both properties. How Lenders Structure an Equity Release What changes between the options is the account the money lands in and the titles the lender holds. Six arrangements are commonly offered: Absorbing the Release Into the Existing Home Loan The lender increases the limit on your current home loan and the extra funds are drawn from it. This top-up is the quickest arrangement to put in place and the one most often offered by default. It also means the money that bought your home and the money that bought your investment share a single account for as long as that loan exists. Splitting the Release Into Its Own Loan The lender writes the released amount as a separate loan account against the same security. It has its own balance, its own statement and often its own rate and repayment type. The Australian Taxation Office (ATO) describes this structure, referring to two loans managed separately under a facility with sub-accounts while secured by the one property. Drawing the Release Through a Line of Credit Some lenders offer the release as a revolving limit you draw down and repay at will. The flexibility that makes it attractive is the same feature that makes the trail hard to follow, since every deposit and withdrawal moves the balance. The ATO points to Taxation Ruling TR 2000/2 for apportioning interest on line of credit and redraw facilities. Cross-Collateralising Both Properties With One Lender Here the lender takes both titles as security for both loans. It can remove the need for a formal release, because the equity in your home is already supporting the new borrowing. The loans may still be separate accounts, so the mixing is of security and not of purpose. Cross-collateralisation causes few tax problems and a lot of practical ones. Refinancing the Home Loan for the Release Where your current lender caps the release, declines the purpose or prices it poorly, the whole home loan may need to move. That brings a discharge, a fresh valuation and a full credit assessment, and it takes longer than a top-up. It also hands you a clean sheet,
Investment Property Borrowing Capacity: How Lenders Assess Your Second Purchase
Key Takeaways Your first investment property loan probably came down to a single question, whether the file serviced. Your borrowing capacity on a second investment property answers to two questions, and they no longer move together. Investment property loans are still assessed on serviceability, which tests whether your income covers every repayment at a rate well above the one you actually pay. Since February 2026, they also sit inside a debt-to-income (DTI) limit, which ignores interest rates and divides your total borrowing by your gross income. Working out which one binds first is where we start as an investment property loan broker when a portfolio file lands, because the answer changes what is worth doing in the months before an application goes near a lender. Which test caps your borrowing capacity on an investment property depends on how much debt you already carry. What Changed for Investors in February 2026 The Australian Prudential Regulation Authority (APRA) has required lenders to assess home loans at three percentage points above the actual rate since late 2021. In November 2025, it added a second control: Quotas Instead of Outright Bans APRA now requires each authorised deposit-taking institution to limit lending at a DTI of six times or higher to 20% of its new residential mortgage lending, measured each quarter. Banks keep full discretion within that allowance to lend to creditworthy high-DTI borrowers in line with their own appetite. Where a new application would risk pushing a lender past its quota, APRA has said the lender may offer a smaller loan or defer the application to a later period. The lending is rationed, and the ration resets every quarter. Limits for Investors and Owner-Occupiers The 20% allowance applies to each bank’s owner-occupier and investor books separately, so investors compete only against other investors for that share. APRA reported the share of new investor lending at high DTI rising from 8% to around 10% over the year to the September quarter 2025, against a much lower figure for owner-occupiers. Exemptions for New Builds and Bridging Loans Loans for the purchase or construction of a new dwelling are exempt from the cap, as are bridging loans for owner-occupiers. The exemption removes the loan from the lender’s quota, not from serviceability, and not from your own ratio the next time you apply. Lenders Outside Regulated Banks Lenders outside APRA’s remit are not subject to the cap, and APRA has noted they hold around 4% of residential mortgage credit. It has also said it will monitor any shift of lending towards them and holds the power to extend these limits to them if needed. Pricing, terms and features there typically differ from a bank product, so any comparison needs to look past the DTI question. Concessions for Smaller Banks APRA applies a four-quarter rolling measurement to smaller institutions, allows a longer implementation period where needed, and gives them the option not to apply the new-build and bridging exemptions in their reporting. Two lenders may therefore treat an identical new-build file differently. Reviews of Settings Since Activation APRA confirmed on 28 May 2026 that the serviceability buffer stays at three percentage points, the countercyclical capital buffer at 1% of risk-weighted assets and the DTI limits at their current level. It also noted that preliminary March quarter data showed high-DTI lending sitting well below the limits, so they are not currently constraining bank lending overall. That is a system-level reading, not a guarantee about any individual lender’s position, and APRA has said it will adjust settings if needed. How the Serviceability Calculation Runs Assessable income comes in, assumed living costs and buffered repayments come out, and whatever is left is capitalised into a loan amount. Eight inputs do most of the damage on a portfolio file: Shading Rent Against Vacancy and Costs APRA’s guidance expects lenders to apply haircuts to income without prescribing a level, and rental haircuts are set by each lender and not published. On $148,200 of gross portfolio rent, counting 80% contributes $118,560 of assessable income and counting 70% contributes $103,740. That difference of $14,820 is a policy choice, not a change in your circumstances. Where a property is untenanted or still being built, most lenders want a rental appraisal from a licensed manager and may apply a further discount to a projected figure. Loading Existing Loans With Buffers Every loan you already hold is reassessed at its actual rate plus the buffer. On $2.6 million of existing property debt, the buffer alone adds roughly $78,000 a year of assessed cost that you never pay. Each property adds one shaded rent stream and one fully buffered repayment, and the buffered side is the larger number. Applying Floors Beneath Assessment Rates APRA expects a prudent lender to run both buffers and floors and to review them regularly, so some files are assessed at a minimum rate that sits above the buffered result. A cheaper actual rate stops improving your assessed position once the floor takes over. Floors differ between lenders and are not usually disclosed to applicants. Assessing Interest-Only Repayments Over Residual Terms An interest-only period helps your real cash flow. It does not help your assessed capacity, because APRA expects lenders to assess the repayment on a principal and interest basis over the specific term for which those repayments apply, excluding the interest-only period. A five-year interest-only period on a 30-year loan is assessed over 25 years, which produces a higher assessed repayment than a fresh 30-year loan of the same size. The structure that makes a property affordable this year can make the next application harder. Setting Living Expenses Against Benchmarks Lenders take the greater of your declared living expenses and the Household Expenditure Measure (HEM), a quarterly benchmark from the Melbourne Institute of Applied Economic and Social Research that scales with household size, dependants and income. The HEM tables are licensed commercially and not published, so you cannot look up the figure being applied to you. Declaring a number below the benchmark rarely helps,