SMSF property borrowing rules change from 10 August 2026

New restrictions on limited recourse borrowing arrangements (LRBAs) will change how self-managed super funds (SMSFs) can invest in property.

From 10 August 2026, SMSFs will generally only be able to use an LRBA to acquire business real property. New LRBAs can no longer be used to purchase standard residential investment properties.

SMSF trustees considering a property purchase should review their plans and seek advice promptly.

What is changing?

An LRBA allows an SMSF to borrow to purchase an asset, with the lender’s rights generally limited to that asset if the loan defaults.

Under the new rules, real property acquired through an LRBA must be used wholly and exclusively in carrying on a business. Standard houses and apartments leased to residential tenants will not qualify.

The change applies to borrowing arrangements, not residential property itself. An SMSF may still purchase residential property outright using available fund cash, subject to the fund’s investment strategy and other superannuation rules.

What happens to existing loans?

Residential LRBAs entered into before 10 August 2026 will generally be protected and will not need to be unwound.

An arrangement established before the commencement date may also qualify if settlement occurs later. However, trustees should not assume that preliminary negotiations, finance approval or an unsigned contract will be sufficient.

Transactions approaching the deadline should be reviewed by an SMSF adviser and appropriately qualified legal professional.

Can an SMSF still borrow for commercial property?

LRBAs may continue to be used to acquire eligible business real property, including:

• offices and warehouses

• retail premises

• medical or consulting rooms

• qualifying primary production land

• other property used wholly and exclusively in a business.

A business owner may be able to use their SMSF to purchase commercial premises and lease them to the operating business at market rates.

However, property combining business and private use, vacant property without a business purpose, or premises retaining residential use may not qualify.

Special considerations for primary production land

Qualifying farmland may include a private residence, such as a homestead, without losing its business real property status if the residential area does not exceed two hectares and the property’s predominant use remains primary production.

Each property and proposed transaction must still be assessed individually.

What trustees should do now

Before entering an LRBA, trustees should:

• confirm the property or asset qualifies

• review the fund’s investment strategy and cash flow

• allow time to arrange finance and legal documentation

• obtain accounting, financial and legal advice before committing.

Incorrectly classifying a property or using the wrong structure can result in serious compliance consequences.

Talk to Collins Hume before proceeding

If your SMSF is considering purchasing property using borrowed funds, contact our team promptly. We can explain how the new rules affect your plans, review the proposed transaction and work with your legal, financial and lending advisers before any commitments are made.

This information is general and does not take into account your objectives, financial situation or needs. Obtain professional accounting, financial and legal advice before acting.