SMSF Lending Frequently Asked Questions (FAQ)
The following are Frequently Asked Questions relating to the provision of credit to Self-Managed
Superannuation Funds (SMSF) particularly as they relate to credit advisers.
The following are Frequently Asked Questions relating to the provision of credit to Self-Managed
Superannuation Funds (SMSF) particularly as they relate to credit advisers.
Q:
Did the MFAA push for LRBA's to be a credit product rather than a financial product?
A:
Yes.
Initially, SMSF borrowing to purchase residential real estate may have technically been
included as a financial product. However, the MFAA lobbied Treasury urging them to not to
classify residential real estate borrowing for an SMSF as a financial product. If this proposal
had proceeded, brokers would not have been able to arrange finance for SMSFs unless they
held an Australian Financial Services (AFS) licence or AFS authorisation. We argued that
these loans are more appropriately a credit product.
Treasury indicated it was not their intention to include this type of lending as a financial
product (and rather the regulation was aimed at instalment warrants and the like).
Accordingly the position is that brokers can arrange credit for SMSFs. However, a person
must be RG146 compliant to give superannuation advice.
In order to advise or recommend or state an opinion that a client’s SMSF should invest in
real estate would require that the adviser hold an AFS licence or be an authorised AFS
representative.
Q:
Are SMSF loans regulated under the National Credit Code?
A:
No.
Loans to SMSFs are not regulated by the National Credit Code. This is usually because the
borrower (the trustee of the SMSF) is a company. If the trustees are individuals, the loan is
still not regulated because the purpose of the borrowing is not for the individual’s personal,
domestic, or household purposes and is not a residential investment of the
individual. However, the MFAA recommends that members treat SMSF loans as they would
a regulated loan and ensure full disclosure.
Q:
I am seeking clarification on whether National Credit Code applies to the following
transaction types:
 Individual as trustee for a super fund (SMSF) purchasing a residential investment
property.
 Borrower is the individual as trustee for the super fund but the property is held in a
holding trust, which is a company ATF the holding trust.
Can you please advise whether the NCCP applies to this? If so, we assume we would then
have to complete a Client Needs Analysis.
The overwhelming majority of our SMSF lending transactions are companies as trustee for
the super fund but we have a couple from time to time where the individuals are trustees.
A:
The NCCP Act and Code regulates lending to individuals predominantly (>50%) for personal,
domestic, or household purposes, or for residential property investment. The two important
things to remember are: the purpose of the loan and who the borrower is.
 Individual as trustee for a super fund (SMSF) purchasing a residential investment
property.
If the borrower is a corporation (including a corporate trustee), the loan is not currently
regulated by the National Credit Code (NCC).
If an SMSF trustee is an individual, and that individual is the borrower, and the purpose of
the loan is to purchase residential property for the SMSF, the loan is still not regulated under
the NCC, because the purpose of the borrowing is not for the individual’s benefit.

The Borrower is the individual as trustee for the super fund, but the property is held in a
holding trust, which is a company as trustee for(ATF) the holding trust.
The identity of the property trustee is irrelevant, as the borrower is the trustee of the
SMSF. Accordingly, as the purpose of the borrowing is not for the individual’s benefit, the
loan is not regulated under the NCC.
Q:
Is it an ASIC requirement that credit advisers need to have SMSF accreditation to write a
loan or at this point is it recommended?
A:
It’s not an ASIC requirement at the time of writing. However, it is highly recommended that
credit advisers who wish to engage in SMSF lending hold an acceptable accreditation.
Lenders often have concerns about whether the process to arrange SMSF lending has been
structured appropriately and so appropriate accreditation helps. Additionally, ASIC
continues to closely scrutinise this area of lending.
Q:
I am interested in completing the SMSF LRBA course offered by MFAA, however I need to
know is there anything else I need to do to cover myself from a regulatory point of view to
ensure that I am OK to give advice on SMSF lending and property purchase through SMSF,
etc.
A:
The message is that brokers can’t give advice or an opinion or recommendation to
consumers about an SMSF, including how or whether to create one and what investments
might be appropriate for that fund. This is financial advice. The creation of a fund entails
provision of legal advice.
The MFAA’s SMSF LRBA course is designed to give brokers the information they need to
know what they can (and can’t) say to a consumer and especially when in relation to SMSF
LRBAs. It includes how to manage the legal and financial advice aspects of the framework of
a client’s SMSF when the decision is made to create one and to purchase real property
within the fund.
Q:
I am an accountant by profession and working as a part-time credit adviser. I am interested
in joining the MFAA’s SMSF Lending Program and just wondering if I have completed the
program will I be eligible to apply for the limited AFS licence?
A:
The MFAA’s Limited Recourse Borrowing Arrangement (LRBA) course is designed for credit
advisers to provide instruction on how to manage the SMSF process for clients who have
made a decision to purchase investment property for their fund.
This information is provided for member general guidance only and should not be construed as
legal advice. The MFAA accepts no responsibility for it.