Property investment through Self-Managed Super Funds (SMSFs) has transformed from a niche retirement strategy into a $1 trillion powerhouse of Australia’s superannuation system¹.
First established in 2007, this specialist lending solution has become a cornerstone investment strategy for SMSFs – providing commercial and residential property investment opportunities for their portfolios.
Bluestone Home Loans has witnessed this evolution firsthand. Let’s take a journey through the history of SMSF property lending, the challenges it faced, and why it’s now more important than ever to understand this unique investment vehicle.
SMSF lending in numbers
The legislative foundations
SMSFs were introduced in the early 1990s as part of Australia’s superannuation reforms, but borrowing within super was initially off-limits. That changed in 2007, when the government introduced Limited Recourse Borrowing Arrangements (LRBAs) under the Superannuation Industry (Supervision) Act 1993 Cth (SIS Act). This allowed SMSFs to borrow for property and other approved assets, provided the lender’s recourse was limited to the purchased asset.
In 2010, Section 67A of the SIS Act further clarified LRBA rules, setting out strict compliance obligations. These changes opened the door for SMSFs to invest in property using leverage—a game-changer for trustees and.
From slow burn to surge
The ability to borrow within super ignited growth. By 2025, SMSFs held over $70 billion in property assets, securing $27bn worth of LRBAs³. In terms of value allocation, SMSFs hold approximately 35% residential and 75% commercial real property assets.
Why property? For many trustees, it’s about control and tangible value. Commercial property, in particular, has been a favourite for business owners looking to own their premises under the business real property rules through super.
The market shake-up
Initially, a number of the major banks dominated SMSF lending. However, with big names pulling out in 2014 and others restricting lending to their own customers, SMSF lending started pulling back from the spotlight. The 2018 Royal Commission then changed everything. Compliance complexity and reputational risk drove major banks out, leaving a gap that non-bank lenders stepped in to fill.
Today, the SMSF lending market is powered by specialist lenders like Bluestone, offering up to 80% LVR, flexible terms, and focussed support
Legislative challenges along the way
SMSF lending hasn’t been without controversy. The 2014 Financial System Inquiry raised concerns about systemic risk, recommending a ban on borrowing within super. While that recommendation wasn’t adopted, it sparked ongoing debate resulting in a number of periodic reviews by the Council of Financial Regulators into the risks. The most recent review recommended any future review be conducted on an ‘as needed’ basis in relation to the LRBA regime³.
Bluestone’s role in the evolution
Bluestone entered the SMSF lending space in 2022 with in-house SMSF led experience from its inception in 2007, responding to demand for a lender that equally understood the market’s complexity and opportunity. Our mission was clear: make SMSF lending accessible without compromising compliance. We’ve delivered on this process with:
Simplified Processes: Streamlined documentation and faster approvals.
Education: Training and resources to help your broker navigate the SMSF world
Policy Enhancements: Removing unnecessary barriers like minimum liquidity requirements, while maintaining robust compliance frameworks†.
Looking ahead
The future of SMSF lending will be shaped by regulation and innovation. At Bluestone, we’re committed to staying ahead—developing products that meet compliance requirements while providing industry insights and assistance to borrowers and their brokers.
The information provided in this article is general in nature and is not intended to be financial advice.
¹ https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf/smsf-newsroom
² https://www.smsfassociation.com/news-articles/limited-relief-for-limited-recourse-borrowing-arrangements-lrbas
³ https://khca.com.au/wp-content/uploads/2025/04/Timeline-SMSF-Changes-2024-2007.pdf
†https://smsmagazine.com.au/news/2023/10/26/bluestone-upgrades-smsf-loan-offer/
