Last updated: 16 August 2026.
SMSF Property Loans After the Residential Borrowing Ban (August 2026)
For fifteen years the standard SMSF property play was simple. Borrow inside your self-managed super fund, buy a residential investment property, let the rent and the growth build your retirement balance. That play is now closed to new borrowers.
If you were mid-plan, this page tells you what changed, what survived, and what a Sydney trustee or business owner can still do with property inside super.
Quick answer: From 10 August 2026, an SMSF cannot enter a new limited recourse borrowing arrangement (LRBA) to buy residential property. Existing residential LRBAs are grandfathered and do not have to be unwound. Refinancing an existing residential LRBA is still permitted. SMSFs can still borrow through an LRBA to buy business real property, meaning commercial premises. And an SMSF can still buy residential property outright with fund cash, because the ban targets the borrowing, not the ownership.
Is the SMSF residential borrowing ban in force?
Yes. Since 10 August 2026, an SMSF can no longer enter a new LRBA to acquire residential property.
The change came through the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026, part of the agreement between the Federal Government and the Greens that got the broader tax reform package through Parliament on 26 June 2026. The Bill received Royal Assent that day and commenced 45 days later, on 10 August 2026. The ATO has published guidance for trustees and advisers since.
Read the scope carefully, because most of the panic we heard in July was about things the law never touched. It restricts one borrowing structure for one asset class. It does not change super tax rates, it does not force any fund to sell anything, and it does not stop an SMSF from owning residential property.
What is banned and what is not
| What you want to do | Allowed after 10 August 2026? |
|---|---|
| New LRBA to buy a residential investment property | No |
| Keep an existing residential LRBA running | Yes, grandfathered |
| Refinance an existing residential LRBA | Yes, at the existing level of debt |
| Increase the debt on an existing residential LRBA | No, a refinance is not a top up |
| New LRBA to buy business real property (commercial) | Yes, unchanged |
| Buy residential property using SMSF cash, no borrowing | Yes |
| Settle a residential contract signed before 10 August 2026 | Yes, under the transitional rule |
| Lease business real property back to your own business | Yes, on market terms |
What happens to your existing SMSF residential loan
Direct answer: nothing is forced. Existing SMSF residential borrowing arrangements are grandfathered and continue under the previous rules.
You do not have to sell the property. You do not have to unwind the bare trust. You do not have to repay the loan early. The arrangement runs to completion exactly as it was written.
Three things are worth doing this year if your fund holds residential property under an LRBA:
- Check what rate you are actually paying. Legacy SMSF loans written in 2021 and 2022 are frequently well behind current pricing, and nobody at the lender is going to call you about it.
- Confirm the liquidity buffer is still there. Lenders wanted several months of repayments held in cash after settlement. If contributions have been thin or the property sat vacant, the buffer may have quietly eroded.
- Map the exit. The loan still needs to be cleared before the fund moves fully into pension phase. Knowing whether that comes from contributions, rent, or a sale changes what you do between now and then.
Can you refinance an existing SMSF residential loan?
Direct answer: yes. Refinancing an existing residential LRBA is still permitted after the ban, and the ATO has confirmed that refinancing a pre-ban arrangement does not bring it inside the ban.
The catch is the loan size. The refinance is expected to be of the existing level of debt rather than an increase, so treat it as a rate exercise and not a cash-out exercise.
Lender policy is the other variable. The SMSF lender panel was already small, and lenders are still working out how they want to treat this book now that no new residential volume is coming. Some will compete hard for a clean, seasoned SMSF loan. Others will quietly step back. That spread is exactly why you want someone checking the whole panel rather than asking your existing lender for a discount.
Our SMSF loan service covers refinancing existing arrangements as well as new commercial ones, and you can sanity check the repayment difference yourself with our loan repayment calculator before you speak to anyone.
What about a purchase that was already underway?
The legislation built in a 45 day transition, from Royal Assent on 26 June to commencement on 10 August 2026, so deals already in flight could finish.
Where the contract of sale was entered into before 10 August 2026, the purchase can generally proceed even if settlement lands after that date.
What does not get you across the line: establishing the SMSF before 10 August, lodging a finance application, or holding an approval in principle. None of those is a contract of sale. If your fund exchanged before the cut-off and is still working toward settlement, keep your lender close and have your SMSF adviser confirm in writing that the arrangement is covered before anyone signs loan documents.
What you can still do: commercial property inside super
Direct answer: SMSFs can still borrow through an LRBA to buy business real property. This is the exception that did not move, and for Sydney business owners it is now the main event.
Business real property means real property used wholly and exclusively in one or more businesses. A warehouse in Norwest, a medical suite in Castle Hill, a workshop off Windsor Road, a shopfront in Baulkham Hills: all can qualify. Zoning alone does not settle it. What matters is how the property is actually used. Mixed use property, say a shop with a flat above it, needs a proper opinion before you commit to anything.
The finance mechanics are the same LRBA structure you already know: a bare trust holds the single asset, the fund makes the repayments, and the lender's recourse is limited to that property. We cover the process end to end in buying commercial property with super through an SMSF, and the lending side sits on our commercial SMSF lending page.
The lease-back most business owners overlook
Here is the arrangement that makes commercial SMSF property different from residential.
Residential property in an SMSF has to be at arm's length. You cannot live in it, and no member or relative can rent it, ever, at any price. Business real property is carved out of the in-house asset rules. Your SMSF can buy the premises your own business trades from and lease them straight back to your business.
Done properly, that means:
- Your business pays rent, which is a deductible business expense.
- The rent lands in your super fund instead of a landlord's account.
- The fund is taxed at 15% on that rent during accumulation, and 0% in pension phase.
- The property sits behind the limited recourse structure, so a loan default cannot reach the fund's other assets.
- You stop being at the mercy of a lease renewal on premises your business depends on.
The conditions are not optional. The property has to genuinely meet the business real property test, the lease has to be at full market rent on commercial terms, and the documentation has to survive an audit every year. Get any of those wrong and you have an in-house asset problem instead of a strategy.
If you already own commercial premises and are looking at the next one, our guide to commercial property portfolio finance in Sydney covers how lenders assess a second and third asset.
Can an SMSF still buy residential property at all?
Yes, with cash. The ban is on the borrowing, not on the asset.
A fund with enough liquidity can still buy a residential investment property outright, provided it fits the fund's investment strategy, meets the diversification and liquidity requirements, and passes the sole purpose test. The arm's length rules are unchanged: no member or relative living in it, no related party tenancy, market rent from unrelated tenants only.
For most funds that is theoretical rather than practical. Putting $900,000 of a $1.1 million fund into one Sydney house is a concentration problem, and it is exactly the sort of thing an auditor will ask about at the next annual audit.
Who this actually affects
- Trustees who were hunting a residential investment. The borrowing path is closed. The realistic alternatives are buying in your own name, often using equity in your existing home, or redirecting the fund toward commercial. Our property investing service covers the personal-name route.
- Business owners renting their premises. Nothing changed for you, and the case arguably got stronger now that residential deals are no longer competing for a narrow SMSF lender panel.
- Existing SMSF residential borrowers. You are grandfathered. Your job is making sure the loan is still priced properly and the fund still holds its buffer.
- Anyone who exchanged before 10 August 2026. Transitional rules should cover you. Confirm it in writing rather than assuming.
- Funds with smaller balances. SMSF property was always marginal below roughly $200,000 to $300,000, because the fixed annual audit and administration costs eat too much of the return. That has not changed.
What to do next
If you hold an existing SMSF residential loan, get the rate reviewed and the buffer checked. Refinancing is open and legacy SMSF pricing is often well behind the market.
If you own a business and rent your premises, get the numbers run on buying them through the fund. That is a real conversation with real figures: fund balance, deposit, the rent your business could sustain, and the lease terms.
If you were counting on a residential SMSF purchase, the strategy needs rebuilding rather than patching, and the answer usually sits outside super.
RyRo Loan Centre arranges SMSF finance across the specialist lender panel, works alongside your accountant and SMSF adviser, and charges you no broker fee. We are based in Norwest and work across Sydney and the Hills District.
Talk to a broker who works in SMSF lending
The residential door is shut. The commercial door is not, and reviewing your existing SMSF loan is still very much on the table.
Book a free strategy call or get in touch and we will look at your fund, your existing loan pricing, and whether business real property inside super stacks up for you. For the wider picture on rules, tax and costs, read our SMSF property investment guide.
Quick answers
Frequently asked questions
Not with borrowed money. Since 10 August 2026 an SMSF cannot enter a new limited recourse borrowing arrangement to acquire residential property. Your fund can still buy residential property outright using its own cash, provided that fits the fund's investment strategy and liquidity needs and passes the sole purpose test. The arm's length rules still apply, so no member or relative can live in it or rent it. For most funds, an unleveraged house consumes too much of the balance to be sensible.
Nothing is forced. Existing residential LRBAs are grandfathered and continue under the previous rules. You are not required to sell the property, unwind the bare trust, or repay the loan early because of the change. Keep meeting the loan terms, keep the fund's liquidity buffer intact, and keep the annual audit clean. If the loan has been sitting on an old rate since 2021 or 2022, this is a good year to review it.
Yes. Refinancing an existing residential LRBA is still permitted, and the ATO has confirmed that refinancing a pre-ban arrangement does not bring it inside the ban. The expectation is that the refinance is of the existing level of debt rather than an increase, so plan it as a rate exercise and not a cash-out. Lender appetite varies quite a bit right now, so check current policy through a broker before committing.
No. SMSFs can still use LRBAs to acquire business real property, which broadly means real property used wholly and exclusively in one or more businesses. Warehouses, workshops, medical suites, offices and shopfronts commonly qualify. Commercial zoning by itself does not make a property eligible, and mixed use property needs a proper opinion before you commit. See our commercial SMSF lending page for how the finance works.
10 August 2026. The enabling legislation received Royal Assent on 26 June 2026 and commenced 45 days later. That 45 day gap was a deliberate transition window so contracts already signed could still settle.
Probably, but confirm it. The transitional rule is built around the contract of sale being entered into before 10 August 2026, in which case the purchase can generally proceed even though settlement happens after that date. Establishing the SMSF, lodging a finance application or holding an approval in principle before the cut-off does not count. Ask your SMSF adviser to confirm your arrangement is covered in writing, and keep your lender informed about settlement timing.
Yes, and it is the main reason business owners use an SMSF for property. Business real property is excluded from the in-house asset rules, so your fund can buy the premises your business trades from and lease them back to the business. The lease has to be at genuine market rent on commercial terms, properly documented, and reviewed each year. Done right, your business claims the rent as a deduction and the money lands in your own super rather than a landlord's account.
No. The measure restricts a borrowing structure. It came out of the negotiation over the Government's broader tax reform package, but the change itself deals with limited recourse borrowing arrangements and residential property, not with the tax rates that apply to super. Rental income inside an SMSF is still taxed at 15% in accumulation phase and 0% in pension phase.
Rebuild the plan rather than patch it. Two paths usually make sense. Either buy the investment property in your own name, often using equity in your existing home, or redirect the fund toward commercial property if you run a business. Which one wins depends on your marginal tax rate, your fund balance and your timeline. Book a free strategy call and we will map both against your numbers.
Yes. The LRBA structure has not changed for business real property. A separate bare trust holds legal title to the single asset while the loan is being repaid, the SMSF is the beneficial owner and makes the repayments, and the lender's recourse is limited to that property. One LRBA holds one asset, so each borrowing needs its own bare trust, and the trust must be set up correctly before contracts are signed.
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