The general rule is that you can actually loan money with your SMSF. This means a loan to another person is considered an investment. What you need to do is make sure you’re charging an appropriate interest rate, appropriate term and the appropriate security for that loan as well.
Now, there’s a couple of distinctions, if I was using my SMSF to lend money to pretty much everyone I know apart from family members, then I don’t really have a maximum amount that I can do before I start breaching rules.
I will say that loans are high-risk in terms of high-risk investments, especially if you don’t have security on the loan. So if your gearing of your super fund is so heavily weighted towards lending money to other people, you may have a diversification issue in your fund. There’s technically no max but you do need to consider diversification. I wouldn’t set up an SMSF with $100,000 in it, and then $99,000 is lent to other people. You need to consider diversification.
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