An LRBA, Limited Recourse Borrowing Arrangement, is the structure a self-managed super fund (SMSF) must use to borrow money to buy property. Introduced in 2007 under s67A of the SIS Act, it requires the SMSF to borrow through a separate bare trust: the bare trust holds legal title to the property, and on default the lender's recourse is limited to that one property, not the rest of the fund's assets.
An LRBA needs four parties in place before the property contract is exchanged: the SMSF itself (the ultimate beneficial owner), the SMSF's trustee (who signs the loan and the bare trust deed), the bare trust's own trustee (who holds legal title as custodian), and the lender. Getting the sequence wrong, most commonly exchanging the contract in the SMSF's name before the bare trust deed is dated, can render the arrangement non-compliant and is not easily fixed after the fact.
Major banks largely exited LRBA lending between 2018 and 2019. Tier-two non-banks now write most of the volume, typically to 80% LVR on residential security and 70% LVR on commercial, priced 1-2% above the equivalent non-SMSF rate. Private lenders fill the files outside that policy, most often on commercial security or higher-LVR requests tier-two lenders won't write.