An LRBA is a type of loan arrangement where the lender's recourse is limited to the specific asset purchased with the loan. In the context of an SMSF, this means the lender can only seize the property used as security if the loan is not repaid.

LRBAs offer several benefits for SMSFs:

• Leverage: Allows the fund to invest in more expensive properties without needing to contribute more funds.

• Growth: Can lead to significant capital growth over time.

• Income: Can generate rental income that can be used to offset expenses and potentially increase retirement savings.

Yes, there are risks associated with LRBAs. These include:

• Negative gearing: If the rental income doesn't cover the loan interest and expenses, the fund may incur a loss.

• Property market fluctuations: If property values decline, the fund could face a loss.

• Loan repayments: Failure to make loan repayments could result in the loss of the property.

To use an LRBA in an SMSF, you must:

• Meet the in-house asset rules: The property purchased must be a qualifying asset, such as a residential or commercial property.

• Have a loan agreement: A written loan agreement must be in place between the SMSF and the lender.

• Comply with superannuation laws: The LRBA must comply with all relevant superannuation laws.

No, LRBAs can only be used to purchase properties that will be held by the SMSF for investment purposes. There are some exceptions in certain circumstances. Seek advice.

Generally, no. The loan amount is typically limited to the value of the property being purchased. However, there may be exceptions in certain circumstances. Seek advice.

If you sell the property, you will need to repay the loan in full. Any profit or loss from the sale will be added to the SMSF's account.

If you have further questions about LRBAs or are considering using one in your SMSF, it's recommended to consult with a financial advisor or accountant who specialises in superannuation.