Related Party Loans
Understanding Related Party Loans in SMSF
Related Party Loans in Self-Managed Super Funds can be a strategic tool if used within the rules. At SMSF Depot, we help trustees understand and implement compliant lending arrangements that align with Australian Taxation Office (ATO) regulations.
What Is a Related Party Loan in an SMSF?
A related party loan occurs when an SMSF borrows money from a related party, such as a member, relative, or entity connected to the fund. These loans must comply with Limited Recourse Borrowing Arrangement (LRBA) rules and be on arm’s length terms just like a commercial lender would offer.
ATO Compliance and Arm’s Length Terms
To avoid breaches, SMSF must ensure that:
The loan has a written agreement
The interest rate matches market conditions
Loan terms (duration, security, repayments) are commercial
Proper documentation is maintained
Failure to follow these standards could lead to compliance issues, including potential penalties and loss of concessional tax benefits.
Learn more about LRBA compliance on the ATO website
Benefits of Structuring It Correctly
When structured properly, related party loans offer:
Increased investment opportunities
Flexibility for property or share purchases
Control over loan terms (while still meeting regulations)
SMSF Depot offers complete guidance to ensure your fund remains compliant while leveraging these benefits.
How SMSF Depot Can Help
At SMSF Depot, we:
Review or draft loan agreements
Ensure the loan meets ATO safe harbour guidelines
Provide SMSF Accounting & Compliance support
Help with SMSF Tax Return reporting
Need help with SMSF structuring or audits? Explore our SMSF Audit Services.