Date prepared: 29 June 2026
The rules for borrowing through a self-managed super fund to buy residential property have changed.
The key issue for anyone currently considering a residential property purchase through an SMSF using a Limited Recourse Borrowing Arrangement (LRBA) is timing.
The short answer is this:
New residential property LRBAs will generally no longer be available from Monday, 10 August 2026.
However, there are important transitional rules. In many cases, settlement need not occur before 10 August 2026. The critical issue is whether the correct acquisition arrangement is entered into before the new rules commence.
What has changed?
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 has now received Royal Assent.
The Act amends the SMSF borrowing rules so that, where an SMSF uses an LRBA to acquire real property, the property must be business real property.
In practical terms, this means:
- ordinary residential investment property will generally no longer be able to be acquired using a new SMSF LRBA after commencement;
- Business real property, such as qualifying commercial premises used in a business, can still potentially be acquired using an SMSF LRBA;
- existing residential property LRBAs are grandfathered;
- existing residential property LRBAs can generally continue to be refinanced;
- SMSFs can still acquire residential property outright using available cash, subject to the normal SMSF rules.
This is not a ban on SMSFs owning residential property. It is a restriction on the use of new borrowings through an LRBA for the acquisition of residential property.
The key date: 10 August 2026
Royal Assent was given on 26 June 2026.
The LRBA changes commence on the 45th day after Royal Assent.
That makes the practical commencement date:
Monday, 10 August 2026
From that date, new SMSF LRBAs for real property will generally only be permitted where the property is business real property.
For ordinary residential investment property, the practical deadline is therefore before 10 August 2026.
To be conservative, clients should not assume they can sign or exchange on 10 August itself. The safer position is to ensure the relevant contract or acquisition arrangement is entered into before commencement.
Do you need to settle before 10 August 2026?
No.
This is one of the most important points.
The transitional rules protect a borrowing arrangement in which the related asset is acquired under an arrangement entered into before commencement, even if settlement occurs after commencement.
That means an SMSF may still be grandfathered where:
- the correct purchase contract is entered into before 10 August 2026; and
- settlement occurs after 10 August 2026.
For example:
If the correct bare trustee signs a binding contract to purchase a residential investment property before 10 August 2026, and settlement occurs in September, October or November 2026, the LRBA may still be protected under the transitional rules.
The issue is not simply when the settlement occurs. The issue is when the relevant acquisition arrangement is entered into.
The safest practical position is that the SMSF’s bare trustee or custodian trustee should enter into a binding contract to purchase the property before the commencement date.
The usual SMSF LRBA structure involves:
- the SMSF;
- the SMSF corporate trustee, if applicable;
- a separate bare trust or custodian trust;
- a bare trustee company or individual bare trustee;
- the lender;
- the purchase contract;
- the loan and security documents.
For grandfathering, the key document is usually the binding purchase contract.
Ideally, before 10 August 2026:
- The SMSF has been established;
- The SMSF trustee is in place;
- The bare trust or custodian trust has been prepared;
- The bare trustee has been established;
- The purchase contract is signed in the correct capacity;
- The finance process is underway;
- The solicitor, conveyancer, broker and SMSF adviser are aligned.
The biggest risk is signing the contract in the wrong name and trying to fix it later.
If the SMSF trustee signs directly, or if the member signs personally and later tries to nominate the bare trustee, this can create SMSF compliance, lending, conveyancing and state duty issues.
For that reason, the contract should be reviewed before signing.
Is setting up the SMSF enough?
No.
Merely setting up an SMSF before 10 August 2026 is unlikely to be sufficient on its own.
Likewise, the following steps by themselves may not be enough:
- setting up the SMSF;
- applying for an ABN or TFN;
- opening an SMSF bank account;
- obtaining finance pre-approval;
- setting up a bare trust;
- paying a holding deposit;
- signing an expression of interest;
- Reserving a property.
These steps may be useful or necessary, but the grandfathering protection is more likely to depend on having a proper acquisition arrangement in place before commencement.
In practical terms, that usually means a properly executed binding contract of sale.
Existing residential LRBAs
Existing residential property LRBAs are generally protected.
If your SMSF already owns residential property under an LRBA before the new rules commence, the loan can continue.
The transitional rules also protect refinancing of an existing borrowing arrangement entered into before commencement.
That means an SMSF should not lose grandfathering merely because it refinances an existing protected LRBA, provided the refinance is properly structured and remains within the SMSF borrowing rules.
Commercial property and business real property
Commercial property is not affected in the same way as ordinary residential property.
The new rule does not simply say “commercial property”. It refers to business real property.
Business real property generally means real property used wholly and exclusively in one or more businesses.
This can include property used in:
- a member’s own business;
- a related business;
- an unrelated third-party business;
- multiple unrelated business tenancies.
The business need not be the SMSF member’s business.
For example, an SMSF may still be able to use an LRBA to acquire a warehouse leased to an unrelated plumbing business, provided the property satisfies the business real property test and the arrangement is otherwise compliant.
However, care is needed with:
- mixed-use properties;
- properties with a residential component;
- vacant commercial land;
- short-stay accommodation;
- residential premises used partly for business;
- development sites;
- properties not currently used in a business.
The label “commercial” is not enough. The property needs to satisfy the business real property test.
Can an SMSF still buy residential property outright?
Yes.
The change restricts new SMSF borrowing arrangements for residential property. It does not prevent an SMSF from acquiring residential property outright using available fund cash, provided the investment complies with the normal SMSF rules.
Those rules include:
- the sole purpose test;
- investment strategy requirements;
- arm’s-length dealings;
- related-party acquisition restrictions;
- no personal use by members or relatives;
- proper lease and management arrangements;
- liquidity and diversification considerations.
Practical examples
Example 1: Contract before 10 August, settlement after 10 August
An SMSF bare trustee signs a binding contract to purchase a residential investment property on 5 August 2026. Settlement is due on 30 September 2026.
The acquisition arrangement was entered into before commencement. The fact that settlement occurs after 10 August should not, by itself, prevent grandfathering.
Example 2: SMSF established before 10 August, contract signed after 10 August
The SMSF is established on 30 July 2026. The bare trust is prepared on 4 August 2026. Finance is pre-approved on 6 August 2026. However, the contract is not signed until 15 August 2026.
In this case, the SMSF may have missed the transitional window for an ordinary residential property LRBA because the acquisition arrangement was not entered into before commencement.
Example 3: Existing residential LRBA
An SMSF already owns a residential investment property under an LRBA entered into before the new rules commence.
That arrangement should generally be grandfathered. The SMSF can continue with the existing loan and may be able to refinance the loan, provided the refinance is properly structured.
Example 4: Commercial warehouse
An SMSF wants to borrow to buy a warehouse leased to an unrelated business tenant.
This may still be possible after 10 August 2026 because the property may qualify as business real property. The fact that the tenant is unrelated to the SMSF members does not prevent the property from being business real property.
If you are considering buying residential property through an SMSF using borrowings, you need to act carefully, not emotionally.
Do not rush into buying a property simply because the law is changing.
However, do not assume there is unlimited time.
Before signing anything, you should confirm:
- whether an SMSF is appropriate for your circumstances;
- whether borrowing from inside the super is suitable;
- whether the property fits your retirement strategy;
- whether the fund will have enough liquidity after settlement;
- whether insurance and contributions have been considered;
- whether the lender will approve the structure;
- whether the contract is being signed by the correct party;
- whether the bare trust and custodian trustee are correctly established;
- whether you have received appropriate SMSF, tax, legal and financial advice.
The cut-off date is important, but suitability remains more important.
Key takeaway
The practical deadline for new residential SMSF LRBAs is before 10 August 2026.
Settlement does not necessarily need to occur before that date.
The safer position is that the correct bare trustee or custodian trustee should enter into a binding purchase contract before commencement. Existing residential LRBAs are generally grandfathered, and refinancing existing protected arrangements should remain available.
Commercial or business real property LRBAs should remain available, but only where the property meets the business real property test.
Need advice before the deadline?
At Umbrella Property Accountants, we can help you understand the tax and SMSF compliance issues before you commit to a property contract.
A residential SMSF LRBA is not suitable for everyone, and the wrong structure can create tax, duty, lending and compliance problems.
If you are considering buying property through your SMSF before the cut-off date, book a Property Tax Advice appointment so we can review the structure before you sign.
General information only. This article does not constitute personal financial advice, legal advice or credit advice. SMSF borrowing strategies should be reviewed by your licensed financial adviser, solicitor, mortgage broker and SMSF tax adviser before any contract is signed.