When a self-managed super fund takes out a loan, the lender will usually require the SMSF to set up a limited recourse borrowing arrangement (LRBA). This is a special type of trust that is used to hold the asset that is being purchased. The LRBA protects the lender in the event that the SMSF defaults on the loan, as the lender’s only recourse is to the asset that is held in the LRBA.
