If you’ve seen the recent headlines about SMSF lending, you might be wondering whether Self Managed Super Funds (SMSFs) can still borrow to buy property.
The short answer is yes, but with one very important change.
As of 10 August 2026, SMSFs can no longer enter into a new Limited Recourse Borrowing Arrangement (LRBA) to purchase residential property. While this has understandably caused concern, it does not mean SMSF lending has disappeared altogether.
In fact, there are still opportunities available, particularly for business owners and investors looking at commercial property.
This article explains what has changed, what hasn’t, and where opportunities may still exist. It’s general information only and is not financial or investment advice.
What Is SMSF Lending?
SMSF lending refers to a Self Managed Super Fund borrowing money to acquire an investment asset using a structure called a Limited Recourse Borrowing Arrangement (LRBA).
Unlike a standard property loan, an LRBA limits the lender’s rights if the loan defaults. Generally, the lender can only recover the asset purchased under that borrowing arrangement rather than the entire SMSF.
LRBAs have been part of Australia’s superannuation legislation for many years and have commonly been used to purchase investment property inside an SMSF.
Learn more about LRBAs from the Australian Taxation Office:
https://www.ato.gov.au/businesses-and-organisations/super-for-employers/self-managed-super-funds-smsfs/investing/limited-recourse-borrowing-arrangements
What Changed on 10 August 2026?
The law now prevents SMSFs from entering into new borrowing arrangements to purchase residential property.
The change was introduced through the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which amended the borrowing provisions contained within the Superannuation Industry (Supervision) Act 1993 (SIS Act).
This means that from 10 August 2026:
- SMSFs cannot establish a new LRBA to buy residential property.
- Existing residential property loans remain in place.
- SMSFs can still purchase residential property outright if they have sufficient funds.
- Borrowing for eligible commercial property (known as Business Real Property) can still be available where all legislative requirements are met.
Many headlines simply said “SMSF borrowing has been banned.”
That isn’t accurate.
The legislation specifically changes borrowing for new residential property acquisitions, not all SMSF lending.
Does This Mean SMSFs Can No Longer Buy Residential Property?
No.
This is probably the biggest misconception.
SMSFs are still able to own residential property.
The difference is that, in most cases, they can no longer borrow to purchase it after 10 August 2026.
If an SMSF already has enough cash available to purchase a residential investment property outright, that may still be possible, provided all the normal SMSF investment rules are satisfied.
The investment must still meet the fund’s investment strategy, sole purpose test and all other legislative requirements.
What Happens If You Already Have an SMSF Loan?
If your SMSF already borrowed to purchase residential property before the legislative changes took effect, those arrangements are generally protected.
Existing loans continue under the previous rules.
The changes are not designed to force existing SMSF property owners to sell their properties or unwind their loans.
If you already have an existing arrangement and you’re unsure how the new legislation affects you, it’s worth speaking with your accountant and your licensed financial adviser.
Where Does Opportunity Still Exist?
Although residential borrowing has changed, SMSF lending has certainly not disappeared.
One area that continues to receive attention is commercial property.
Under the legislation, an SMSF may still be able to borrow to acquire eligible Business Real Property, subject to the requirements of the SIS Act and the fund’s overall investment strategy.
For many business owners, this can be an attractive structure because the SMSF owns the commercial premises while the operating business may lease the property at market rates.
This is often discussed as part of a broader retirement and wealth planning strategy.
However, whether this is appropriate depends entirely on your circumstances and should only be considered after receiving advice from a licensed financial adviser.
As accountants, our role is to ensure the structure complies with taxation and superannuation legislation. We do not recommend investment strategies or advise whether purchasing a particular property is suitable for you.
Can My Business Rent a Property Owned by My SMSF?
Potentially, yes. Everyone’s situation is different.
One of the unique features of SMSFs is that, unlike residential property, a business can often lease eligible commercial property owned by the SMSF provided strict legislative requirements are followed.
Generally, this includes:
- leasing at market rates
- commercial lease documentation
- arm’s length dealings
- ongoing compliance with the SIS Act.
This strategy is commonly used by many established business owners, but it requires careful planning and professional advice.
More information about Business Real Property can be found on the ATO website:
https://www.ato.gov.au/businesses-and-organisations/super-for-employers/self-managed-super-funds-smsfs/investing/business-real-property
Should You Set Up an SMSF Just to Buy Property?
Probably not.
An SMSF should never be established solely because you want to purchase property.
An SMSF is a long-term retirement vehicle with significant trustee responsibilities, ongoing compliance obligations and investment rules.
Property may be one investment held by an SMSF, but it should never be the only reason the fund exists.
A licensed financial adviser is the appropriate professional to determine whether an SMSF aligns with your retirement objectives and investment strategy.
Frequently Asked Questions
Can an SMSF still borrow money?
Yes.
SMSFs may still be able to borrow using an LRBA in circumstances permitted under the legislation, including eligible Business Real Property.
Can my SMSF still buy residential property?
Yes.
An SMSF can still purchase residential property.
The key change is that new borrowing arrangements for residential property are generally no longer available.
Can my SMSF still buy commercial property?
Potentially, yes.
Commercial property continues to be an important investment option for many SMSFs, including Business Real Property that satisfies the legislative requirements.
Does this affect existing SMSF loans?
Generally, no.
Existing residential property borrowing arrangements are grandfathered under the legislation and continue under the previous rules.
The Bottom Line
The recent changes to SMSF lending are significant, but they haven’t closed the door on SMSF property investing altogether.
Instead, they’ve changed where opportunities now exist.
For some investors, purchasing residential property inside super will now require sufficient cash rather than borrowing.
For others, particularly business owners considering commercial premises, SMSF lending may still remain an option under the current legislation.
Every SMSF is different, and every investment decision should form part of a broader retirement strategy prepared by a licensed financial adviser.
If you already have an SMSF, are considering establishing one, or simply want to understand how these legislative changes affect your tax and compliance obligations, we’d be happy to help you understand the rules and work alongside your financial adviser to ensure your structure remains compliant.
Sources
Australian Taxation Office, Limited Recourse Borrowing Arrangements (LRBAs)
https://www.ato.gov.au/businesses-and-organisations/super-for-employers/self-managed-super-funds-smsfs/investing/limited-recourse-borrowing-arrangements
Australian Taxation Office, Business Real Property
https://www.ato.gov.au/businesses-and-organisations/super-for-employers/self-managed-super-funds-smsfs/investing/business-real-property
Federal Register of Legislation, Treasury Laws Amendment (Tax Reform No. 1) Act 2026
https://www.legislation.gov.au/
Federal Register of Legislation, Superannuation Industry (Supervision) Act 1993
https://www.legislation.gov.au/
Moneysmart, Self-managed super funds (SMSFs)
https://moneysmart.gov.au/how-super-works/self-managed-super-fund-smsf