- Investors can no longer purchase residential property through their SMSF using a limited-recourse borrowing arrangement
- They can still use this arrangement to purchase eligible commercial property through their SMSF
- Existing investments are not impacted by the changes
New rules affecting property borrowing through self-managed super funds (SMSFs) took effect on 10 August 2026, changing how some investors can finance property purchases within their SMSF.
Under the new rules, an SMSF can only use a limited-recourse borrowing arrangement (LRBA) to buy business real property.
- An LRBA is a type of loan where, if the SMSF can’t repay the loan, the lender can generally only claim the property that was purchased with the loan, not the fund’s other assets.
- Business real property generally means property used wholly and exclusively in a business, such as commercial premises.
As a result, SMSFs can no longer use a new LRBA to acquire residential investment property.
Importantly, the changes are not retrospective. According to the Australian Taxation Office (ATO), several existing arrangements are unaffected.
What hasn’t changed?
The ATO says the new rules do not affect:
- Existing LRBAs entered into before 10 August 2026.
- Refinancing of existing LRBAs entered into before 10 August 2026.
- Binding contracts to acquire real property that were exchanged before 10 August 2026, even if settlement or the LRBA occurs after that date.
This means many SMSFs with existing property investments can continue under the previous rules.
What does this mean for investors?
The changes are likely to influence how some investors approach property within their super.
While an SMSF can still purchase residential property in some circumstances, using an LRBA to do so is no longer generally permitted. Investors considering this strategy will need to understand the new requirements before making any decisions.
SMSF property investing remains a specialised area involving superannuation law, lending rules and taxation considerations. It can offer opportunities for some investors, but it is not suitable for everyone and should form part of a broader retirement strategy.
Working with the right professionals can help ensure the structure is appropriate and complies with the rules. A broker can assist with SMSF lending options, while an accountant, financial planner and legal professional can provide guidance on other aspects of the strategy.
Find out more about your options with a free chat with a Loan Market broker.
