It's a Broker Thing
It’s a Broker Thing brings you real broker conversations, the kind that happen when you’re talking shop with someone who understands the pace, the pressure and the unexpected moments that come with the job.
Each episode shares stories, insights and practical ideas from people who’ve genuinely lived broking, with honest chat and a few laughs along the way.
This podcast is for general education only and isn’t financial, legal, or tax advice. The guests’ views are their own. Bluestone accepts no liability for errors or how you use this information.
It's a Broker Thing
13. SMSF Lending's Biggest Shake-Up - with guest, Richard Chesworth
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With recent changes to SMSF lending, brokers are navigating a new landscape... one that’s creating both questions and opportunity.
In this episode, Richard Chesworth - Bluestone’s resident SMSF guru and Head of Specialised Distribution - talks to us about what’s changed, what brokers are seeing on the ground, and where SMSF lending still fits today.
It isn’t the end of SMSF, it’s a reset.
Richard’s last SMSF webinar booked out in minutes... This episode will be one brokers will be saving.
If SMSF lending is on your radar, or about to be, this is essential listening.
👉 Listen to Episode 13 of It’s a Broker Thing now
Welcome to It's a Broker Thing podcast, brought to you by Bluestone Home Loans. Each episode we'll dive into market updates, practical insights, and real stories for brokers who want to stay ahead, build stronger relationships, and grow their business. Let's dive in. SMSF lending has spent years in the too hard basket for brokers, but right now it's back in the spotlight. The federal budget has just introduced major shakeup with new residential SMSF lending set to be banned, and brokers are already seeing the ripple effects play out in real time. On today's episode, we'll talk about what the SMSF lending ban actually means for brokers on the ground, why some clients are rushing and why others are pausing, and whether SMSF is about to become more niche or more relevant than ever. And joining me today is one of my colleagues, Richard Chesworth, or as we know him as Ches, who's our head of specialist distribution at uh at Bluestone. Ches, welcome to It's a Broker Thing.
SPEAKER_00It's great to be here, Tony. Um and what a time to come on to It's a Broker thing. To see this journey, I was just thinking, it's coming up to 18 years, and it's the biggest change I think that's hit the super at self the self-managed super world since the legislation came into play in 200 um seven. Now, this time later, it's now coming to an end on resi purchases. So with borrowing stuff.
SPEAKER_01You're sought after in the market in in self-managed super fun. We we actually had to, you know, sh work around your schedule to even get you in here on the uh the podcast. But and and you're known as having a finger on the pulse in the SMSF world. Was this a surprise to you?
SPEAKER_00It was, and I always have a disclaimer. I know the lending world back to front, and it's one portion of it, but I'm really passionate about the lending space. It was a surprise to me. And to put into context, I think um Tuesday morning last week, literally, I was having my serial and I opened up the Finn review on my phone, and I thought, oh, there's another story about the Greens wanting to attack self-managed superfund lending. And I read the article and I thought, actually, this is pretty concerning. And then by late that morning, the government came out and announced announced they were going to support the band. So it took me by surprise. It's taken the industry by surprise how rapid that change has pushed through there. Um, really, I think the first murmurings was late Monday, and then it came through.
SPEAKER_01Yeah, I must admit, um I I think we spoke on Tuesday, and I was uh I was in Singapore um and uh I I was over in Singapore with my brother and um we sat down for breakfast and uh um lobbed that piece of information on the table, and uh I certainly had uh had not heard any rumblings around it, so yeah, it I think caught everyone.
SPEAKER_00It has taken us by surprise. And I was actually chatting to someone in the street the other day. Their view was actually was uh you know a last piece they left on the table as that final bargaining chip for the government to get the changes through. Whether that was the case, we can't speculate. It's happened now, and so now what do we do moving forward and you know how do we manage the immediate time frame and on from there?
SPEAKER_01Yeah, so it's just it's a good point because um it's passed the Senate, it'll it'll go back to uh the House on Thursday, I think, tomorrow. Um, and then um uh will go to the Governor General to be passed. So it looks like it it the banning of residential uh lending um in SMSF will will go through. It's actually underway. What are brokers seeing then um today and what are you hearing from brokers?
SPEAKER_00I think there's I think one way I've framed the SMSF lending market over the years has been there's been so much more talk than activity. And I think that's the case now. There's a lot of talk out there, there's a lot of pushing down different channels. Some brokers have a lot of matters on their desks, they're trying to tidy up, others are trying to get their heads around things, and I think what we'll probably chat about today is what they need to be mindful of in doing. But yeah, so it depends on the broker's position. Um, but whichever it is, if they're in the resie space, they need to be able to move quickly. But in doing that, really the deadline's coming. Um, it's actually the 9th of August is the last date you'll be able to sign a contract to purchase a residential property in a self-managed superfund with borrowing attached. You can still buy a residential property in the superfund after that, but there's no borrowing attached. So it's when you've got a borrowing requirement there. That's signing the contract. The contract has to be signed by that date. Not the prep the property doesn't have to settle by that date. It can settle, and you know, it could be I I had someone contact us today, and it's for settlements in 2029. Now that's a whole different spec at a risk bucket there going into your super fund out to that date there. So the SMSF trustees going to be able to have their positions there, but the legislation is the the the wheels need to be in motion, as in you have to have had signed your contract on the 9th of August. Why I'm saying the ninth? Because the law actually it comes into play on the 10th. So on the 10th, you can't do it. It's the ninth, it's the day.
SPEAKER_01You been inundated uh with calls? Are you um is is it is the 45-day dash started or are people holding back a little bit?
SPEAKER_00I know. The the the clock's ticking and it's clicking, ticking fast, and um and yeah, the the calls, my phone has been running hot with all sorts of questions. And you know, you start thinking actually you can do this, you can't do that. What do people have to watch out for? I think the main things people need to be doing is um particularly a broker, really focus on your what what you're licensed to do. And that's the lending assistance and lending advice. And even more so now, if the customer's got a question to you, you're not the person to solve it. You need to work closely with their accountant, with their planner if they have one, with their conveyancer or solicitor. Questions like signing the contract, you know, when do I sign it? What name do I put on it, all those things in the current time frame and the deadline, and we're just talking resi property here. You want to make sure you're pointing the customer the right direction. The reason I say that is A, if you've got to sign it in the bear trustee's name. B, I've had questions about is it in, you know, the is it before, does the bear trust have to be set up before or after signing the contract? It falls under trust law. So that's very much a case of it depends on the state and jurisdiction. Your role as a broker really shouldn't be advising customers down that path. And the other two things to watch out for is the single acquirable asset rule. It has to meet, so there's three things. It's the single acquirable asset, we're getting your contract their trust set up properly. Is it a single acquirable asset? Does it meet that requirement? And thirdly, is the contract signed in the right name? If you get any of those last two things wrong, and you've got to rescind your contract, and it's on the 10th of August onwards, you're in a world of pain. Yeah. I don't believe, and you know, correct me if I'm wrong, and is it again, this is where people need to get their legal advice. You can't rescind a contract and then go back into a contract when it's banned. So timing is key, and again, for brokers, making sure you're actually helping the customer by leveraging their right advice channels.
SPEAKER_01So it seems to me that there's there's never been a more important time for brokers to ensure that they've got those strong relationships with accountants, with solicitors, those trusted advisors out in the marketplace, not only for business, but for ensuring they're doing the correct and right sort of business.
SPEAKER_00That's right. And I think if it's your customer, um you can put, and by all means, put the onus on the customer. They're the trustee of the self-managed super fund. They are ultimately responsible for their actions. And they sign that in their declaration when they step up to being a um running a self-managed super fund. It's not as easy as generally people say. There is responsibility, comes with that flexibility. Um, but in saying that, rather than putting just the onus on them, say to them, what's your accountant's name if you don't know? What's your solicitor's name, um, if not conveyancer, or their planner? Let's get on the phone now and actually talk to them together. So you're ashamed of that customer and then their other referral partners, you're working with each other. Because hate to say it, you might find for some brokers an SMSF loan doesn't come across their desk that often. It's exactly the same for a solicitor or a conveyancer. So that thing of actually, is this a single acquirable asset? Because I can see it's a unit and a car space. And in Victoria, to all the Victorians out there, don't be fooled by saying it's an accessory lot. Yes, you'd think that's the case, but under that accessory lot, unless there's a restriction, they have to be sold together. They can only be sold together, they are separate acquirable assets. Just amplifying the need for you to support your customers by leveraging their other advisors who are, you know, legally and responsible in those specific lanes.
SPEAKER_01So this is um a series of changes that the government have made, um, largely to investors. Yeah. But it's not the death of property investment. So if we stick to SMSF, it's just residential borrowings in an SMSF. There's still other opportunities for um an SMSF trust to uh to do borrowings and and and to get into into property, correct?
SPEAKER_00There is. I think let's take a step back, and I think if you look at Self Many Superfund world, there's you know um over a trillion dollars of assets sitting in there. Um three percent of those assets are securing what's called the limited recourse borrowing arrangement, and that that makes up around um six point, oh sorry, eleven point three percent of SMSFs have a limited recourse borrowing arrangement, and those limited recourse borrowing arrangements represent about six point nine percent of the total assets, um, which is sitting around $70 billion in the fund, um, thereabouts. Um, $38 billion of that is residential properties. So we've seen a big change for a small part of the market. Um, those residential properties secure around $13 billion worth of loans. So it's, you know, we've had a massive change for a small part of the market. So where does the opportunity lie? People are still in a position, and there's actually a lot of unleveraged property, residential and commercial, or non-residential, because there's I'm talking farms and everything, in a self-managed superfund, and then a portion is gear. But where does the gearing still lie? It falls into what you call business rule property, which is assets which you use 100% for commercial business use, and uh which actually works um aligns in some cases really well in the SMSF segment, particularly for your self-employed and investor market.
SPEAKER_01And uh, how has that market been growing over the the the last few years? I know I know there's more and more players into it, but is it is it growing as an investment avenue um strongly?
SPEAKER_00I think borrowing in super itself as a whole, and I haven't actually gone down and thought how's each I actually I think Resi did run stronger than commercial, as in the number of purchases, because generally rightly or wrongly, and I'm not going to make a call on whether it's an appropriate investment or not, because I'm not licensed for that. People have an appetite for residential property, so they're buying that. It is an investment avenue. The commercial side is either investment or for that business use on a full arm's length basis. Um, it's been consistent. So, you know, just doing the numbers in my head before, SMSF lending um on I think the 17th of September this year would have been its 19th birthday. So you're coming up to 19 years, I say it's a mature market now. So you've got people who have borrowed to buy a property, have either sold the property or they've paid the debt out. You've got other ones who are refinancing, and you've got others now purchasing and continue, and when there's a borrowing in play, that will still happen in the non-residential segment. So they're gaining that business real property market. So um it's all I'd say is it's consistent, you know, and self-managed super fund has grown over years, over the years, performance has grown. But it's funny, I was looking at the stats, and and I like to be transparent in this market. I looked at the total number of assets with borrowing against it compared to the total super balances back in 2019-20 was 7.5% of the total SMSF asset balance. It's actually, you know, in the 2024 figures, and that's we've got to go off because the 2025 still haven't been fully finalized, it was down to 6.9%. So it's a consistent market, and I feel it'll be consistent going forward. Um do will people elect if they want to have that geared exposure in super to switch to commercial? It is a different asset type, so people do need to do their homework.
SPEAKER_01I'll come back to the commercial piece because I I just want to explore that. But I think it's it's it's worth um just emphasising that if you've currently got a residential um limited recourse loan uh in your super, that gets grandfathered and you're not impacted. And if you if you sign a contract on on a new purchase by the 9th of August, you still get the same benefits and are allowed to do it.
SPEAKER_00Correct. So they're grandfathered, but that doesn't mean just let them sit there. I think um as an industry as a whole and as the SMSF trustees, I think that management of the existing loan has been underserved by everyone. Um, it's a passive lend. It's out of your personal balance sheet, it's sitting over the sides here on your super fund. So you're not watching the transactions in and out. If I'm having a new borrowing myself, it's not impacting it. So unfortunately, brokers may not have raised the question about what are you doing with that old loan? Accountants aren't asking it. So what I've seen is interest rates, um, you know, where I'm looking at one at the moment, it is a commercial one, but I've seen exactly the same in the resi space. You know, we're we're looking to refinance this loan in the 7% range. It's with another lender who's still active in the market at the moment, but the rate has risen in the background into the mid-11s. So refinance is key. Again, the rese space you can still refinance. And if you've got direct costs related to maintaining your borrowing, as in I've got a break cost from a lot of lender or this, that, and the other, you can actually build that in on top of the refinance balance. There's no cash out, but maintaining the borrowing is the direct cost in maintaining that facility. So you can fund that as well. Um, there's a little catch there, and I don't normally talk this down the broker channels. Um, be mindful, and this is more again the accountant's role, is if that uh if it was originally done before June, 30th of June 2018, speak to the accountant to see if that will have any impact on their total super balance calculations. So that's just a tip to take away, not for a broker to advise on or anything like that, but to direct the customer or to speak to the accountant on that, because that may have implications. It may not as well.
SPEAKER_01You um mentioned that uh residential uh lending in SMSF has probably been um the stronger gross engine. Um people get residential, like we all live in a house and we get what that is. Commercials, you know, uh a little bit different. What is different and and and what what are the uh pitfalls or or things that brokers need to be aware of to um to lend in commercial?
SPEAKER_00Yeah, I think commercial um there's two sides of the coin here when it comes to borrowing for commercial, again, non-residential or business real property in the SMSS space. Is it for an investment use? So if it's for an investment use, you're gonna acquire the property. Um what are you gonna do for tenancy? We don't have the the um you know the capacity issues we're seeing in the residential market. So what's your plan if you're buying a commercial property and it's investment purposes, to um have a tenant in place? What are the costs you've got to outlay to get that tenancy in place? Then what's the lease terms going to be? You know, is it is it a three-year lease? Is it increases with CPI and the like? So it's seeing what the you've got to build the lease terms and also um have the property itself and have contingencies for that potential vacancy period, which might be six, maybe twelve months, you know, to get that tenancy in place. We go down shopping strips, and you know, we're here in Sydney, so Parramatta Road, we see a lot of vacancies there. So it's understanding the property, it's understanding its use and the appetite. Um, on the flip side, if it's uh individual buying, so you've stepped out, you may have had a career in banking and working with them with Bluestone for years, and suddenly I've had a change of heart and I've finished there and I've got my own business. I like bikes. So I might have a I might go, I'm gonna start a bike shop and I'll do get mechanics in there, mechanic work, and I could go and rented premises and I might turn around and say, okay, is it suitable for me? And I think that's the big question. Is it suitable to open your self-managed super fund? Yes or no. Ideally, I'd seek advice on that. And I set up my self-managed super fund, and then I might say, rather than renting elsewhere, I might go and buy a commercial premises, and that means I've got continuity of um, I know where my premises are going to be, the landlord's not going to shut down on me, the landlord's not going to put up the rent, I know where it is. And the other benefit is if I buy that property in my self-managed superfund as well as continuity, there's an asset there. And rather than my rent going elsewhere, my rent's actually going to my super as well as my contributions. The key there is any transaction you're doing between a related party and a self-managed super fund, it needs to be on arm's length terms. It needs to be a formal lease in place and it needs to be an enforceable lease. So it goes down to the extent of making sure that would be on a market rate the rent. It's paid monthly. You should be showing that because these are the things that come up in the orders. The other attractive thing about commercial, unlike Resi, in a Resi space, I can't buy a property from a related party. And that related party goes through as far as you want to get really technical. I've got a partnership and a racehorse with someone. Well, they're a related party because that party, because that's deemed a partnership. It could stretch that far, and you need to be more mindful of that, I think, in the commercial segment. But in the commercial space, I can buy that property from myself into my fund or a related party into the fund. Once again, it's keeping it on an arm's length basis, making sure you're purchasing at market value. I look at this segment, and the ATO has probably the one of the strongest data matching systems in the world. And if I'm selling my commercial property to myself managed super fund, it would most likely pick up in their system that that's happened. Not saying it will, but it may pick up. And if I've thought this is great, I'm gonna, for example, the property is worth 1.8 million, and I know that, but I'm gonna do a contract for 1.25 million. Now the ATO will most likely go, well, okay, let's look at this. The purchase has gone through. If they don't get you on the purchase price, they may get you on the yield on the property, which may have gone from, you know, 10% to 14% or 15%, and is at an appropriate yield. So you've just got to do things right. It's not a way of cutting corners. You want to protect yourself, dot the I's, cross the T's, have everything at arm's length basis because the last thing you want to do is blow up your retirement savings.
SPEAKER_01Mate, you're not going to believe this, but uh we've we've run out of time. And uh, if you just tuned in, we've been listening to the Richard Chessworth show uh talking uh about self-managed super funds. No, mate, um pleasure to have you on. Wouldn't mind um uh getting you back um because I know you're passionate about um some of the behaviour that's going on in the marketplace at the moment, and brokers have got to be really careful about um some of the spruking that's uh that's going on um with property developers and uh make sure that they they don't go down that path and and fall into those traps. Pleasure to have you, and thank you for joining us on another episode of It's a Broker Thing. Make sure that you subscribe for more insights, and we'll see you on the next episode. That's a wrap of this episode of It's a Broker Thing, brought to you by Bluestone Home Loans. We love sharing ideas that help you stay ahead because backing brokers, well, it's a Bluestone thing. Hit subscribe and join us next time for more insights and stories that keep you in the know. This podcast is for general education only and isn't financial, legal, or tax advice. Guest views are their own. Bluestone accepts no liability for errors or how you use this information.