From 10 August 2026, self-managed superannuation funds can no longer enter into new borrowing arrangements to acquire residential property.
For SMSF trustees who already hold residential property under a borrowing arrangement, or who were considering using their superannuation to fund a residential property purchase, the changes are significant.
Here is what has changed, what remains available and what SMSF trustees should be considering now.
What Has Changed
From 10 August 2026, SMSF trustees can no longer enter into a new Limited Recourse Borrowing Arrangement, or LRBA, to acquire residential property.
An LRBA is the principal exception that has allowed an SMSF to borrow to acquire an investment asset. Under the arrangement, the asset is held separately for the SMSF while the borrowing remains in place. Importantly, the lender’s rights are generally limited to the asset acquired rather than the SMSF’s other assets.
LRBAs have been available to SMSFs since 2007 and have commonly been used to fund property acquisitions.
The new restrictions were introduced as part of the Federal Government’s broader tax reform legislation and commenced on 10 August 2026.
The result is straightforward: an SMSF can no longer establish a new LRBA to fund the acquisition of residential property.
What Has Not Changed
The changes do not prohibit all SMSF property borrowing.
Existing residential LRBAs are protected
If an SMSF already had a residential LRBA in place before the new rules commenced, the arrangement is generally protected.
The legislation does not require existing residential property to be sold simply because it was acquired under an LRBA.
Existing arrangements may also continue to be maintained or refinanced, provided any refinancing falls within the relevant grandfathering provisions and continues to comply with the LRBA rules.
Certain pre-existing contracts are protected
Transitional provisions also apply where an SMSF entered into a binding contract to acquire residential property before 10 August 2026.
This means settlement may still proceed after 10 August 2026 where the acquisition falls within the transitional provisions.
That window has now closed. An SMSF that had not entered into a binding acquisition contract before 10 August 2026 can no longer establish a new LRBA to fund a residential property purchase.
Business real property can still qualify
SMSFs may still be able to use an LRBA to acquire qualifying business real property.
This may include certain commercial or industrial premises used in a business.
For business owners, this remains an important distinction. An SMSF may still be able to borrow to acquire business premises which are then leased to a related operating business, provided the transaction satisfies the relevant superannuation and related party requirements.
Whether a particular property qualifies as business real property will depend on the circumstances and should be considered carefully before any transaction proceeds.
Residential property can still be purchased without borrowing
The changes do not prevent an SMSF from purchasing residential property outright.
An SMSF can still acquire residential property using its own available funds, without borrowing.
However, trustees should carefully consider the consequences of committing a substantial proportion of the fund’s assets to a single property, including liquidity, diversification and the SMSF’s ongoing ability to meet its liabilities and obligations.
Financial and taxation advice should be obtained before proceeding.
Who Is Affected?
The practical effect of the changes will depend on where your SMSF was in the process as at 10 August 2026.
Already have a residential LRBA?
Your existing arrangement is generally protected, although the terms of any proposed refinance or restructure should be reviewed before changes are made.
Signed a residential property contract before 10 August 2026?
Your acquisition may fall within the transitional provisions even if settlement is still to occur.
Were planning to purchase residential property through an SMSF but had not signed a contract?
A new LRBA can no longer be used to fund that residential property acquisition.
Considering purchasing business premises?
LRBA borrowing may still be available where the property qualifies as business real property and the arrangement otherwise complies with the superannuation rules.
What Should SMSF Trustees Do Now?
The new rules took effect quickly and there will inevitably be SMSF trustees whose arrangements were already underway when the legislation changed.
If your SMSF has an existing LRBA, a property acquisition currently in progress or a proposed transaction that was structured on the assumption that borrowing would be available, it is important to confirm how the new rules apply before taking further steps.
Particular care should be taken before:
How Zervos Lawyers Can Assist
Zervos Lawyers advises clients on the legal structuring of SMSFs, property acquisitions, business structures and estate planning.
Where an SMSF property transaction involves financial, taxation or lending considerations, we can work alongside your accountant, financial adviser and lender to ensure the legal structure reflects the strategy being implemented and complies with the relevant legal requirements.
If you already have an SMSF property borrowing arrangement, have a transaction currently underway or need to reconsider a proposed property purchase following the changes, we can assist you to understand the legal position and the options available.
Vanessa Loquias | Solicitor
E vanessal@zervoslawyers.com.au
Disclaimer This article provides general information and does not constitute legal advice. Zervos Lawyers does not guarantee its accuracy or completeness. For advice on your specific situation, please consult a qualified legal professional. This article does not constitute financial or taxation advice.
