Last updated: 16 August 2026.
SMSF Property Investment Guide 2026: What Still Works After the Borrowing Ban
Property inside a self-managed super fund used to have one default shape: an LRBA, a bare trust, and a residential investment property. As of 10 August 2026 that default no longer exists for new purchases. What replaced it is narrower, more commercial, and better suited to business owners than to anyone chasing a rental in the outer suburbs.
This guide sets out the position as it actually stands now.
Quick answer: SMSFs can no longer enter new limited recourse borrowing arrangements to buy residential property. The ban commenced 10 August 2026. Existing residential LRBAs are grandfathered and can be refinanced at the same level of debt. SMSFs can still borrow to buy business real property, and can still buy residential property outright with fund cash. The tax treatment of SMSF property, 15% in accumulation and 0% in pension phase, is unchanged.
What changed on 10 August 2026
Direct answer: new SMSF borrowing to buy residential property was banned, effective 10 August 2026.
The measure sat inside the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026, which passed as part of the deal between the Federal Government and the Greens on the wider tax reform package. Royal Assent was 26 June 2026, and the amendment commenced 45 days later. The ATO has released guidance for trustees and advisers.
Two points that get lost in the noise. First, this is a restriction on a borrowing structure, not a change to superannuation tax concessions. Second, it applies to residential property. Business real property was deliberately left out.
For the loan-side detail, including deposits, lender policy and how a commercial LRBA is priced, read our companion piece on SMSF loans after the residential ban.
What you can and cannot do now
| Action | Position after 10 August 2026 |
|---|---|
| New LRBA for a residential investment property | Banned |
| Existing residential LRBA | Grandfathered, continues unchanged |
| Refinance an existing residential LRBA | Permitted, at the existing level of debt |
| Increase debt on an existing residential LRBA | Not available |
| New LRBA for business real property | Permitted, unchanged |
| Buy residential property with fund cash, no loan | Permitted |
| Residential contract signed before 10 August 2026 | Covered by the transitional rule |
| Lease business real property to your own business | Permitted, at market rent |
Existing SMSF loans are grandfathered
If your fund already holds residential property under an LRBA, the law does not touch it. No forced sale, no forced unwind, no early repayment. The arrangement runs its course under the rules that applied when it was written.
That said, a grandfathered loan is not a loan you should ignore. Three things worth checking this year:
- The rate. SMSF loans written in 2021 and 2022 are commonly well behind current pricing, and no lender is going to volunteer that.
- The liquidity buffer. Lenders wanted several months of repayments held in cash after settlement. Vacancy, repairs and flat contributions can erode that without anyone noticing until the audit.
- The exit. The loan still needs to be cleared before the fund moves fully into pension phase. Whether that comes from rent, contributions or a sale changes what you do between now and then.
Run the numbers on a rate change with our loan repayment calculator before you talk to anyone.
Can you refinance an SMSF residential loan after the ban?
Yes. Refinancing an existing residential LRBA remains permitted, and the ATO has confirmed that refinancing a pre-ban arrangement does not pull it inside the ban.
The limit is the balance. A refinance is expected to be of the existing level of debt, not an increase, so it is a repricing exercise rather than a way to release equity from the property.
Lender appetite is the moving part. The SMSF lender panel has been small since the major banks stepped away in 2018, and lenders are still deciding how they want to hold this book now that no new residential volume is coming behind it. Some are pricing sharply for clean, seasoned loans. Others have gone quiet. Our SMSF loan service covers refinancing across that panel.
Commercial property: the borrowing path that stayed open
Direct answer: an SMSF can still use an LRBA to acquire business real property, and nothing about that changed on 10 August 2026.
Business real property means real property used wholly and exclusively in one or more businesses. Warehouses, workshops, medical and dental suites, offices, showrooms and shopfronts commonly qualify. Around the Hills District that covers a lot of ground: light industrial in Norwest, consulting rooms in Castle Hill, service businesses along Windsor Road.
Two traps to avoid:
- Zoning is not the test. A property being zoned commercial does not automatically make it business real property. Actual use is what counts.
- Mixed use needs an opinion. A shop with a residence above it, or a warehouse with a caretaker's flat, does not qualify by default. Get it assessed before you commit.
The structure is the LRBA you already know. A bare trust holds the single asset, the SMSF is the beneficial owner and makes the repayments, and the lender's recourse is limited to that property. The full purchase process is covered in buying commercial property with super, and the finance sits on our commercial SMSF lending page. Repayment structure matters more inside super than it does outside, because the fund has to meet the repayments out of rent and contributions. If you are weighing principal and interest against interest only, our guide to interest only home loans sets out the trade off and what happens when the interest only period ends.
The lease-back: why business owners use this at all
Residential property in an SMSF has to be at arm's length. No member or relative can live in it, and it cannot be rented to a related party at any price. Business real property is different, and this is the whole point of the strategy.
Business real property is excluded from the in-house asset rules, so your SMSF can buy the premises your own business trades from and lease them back to that business.
What that produces:
- Your business pays rent and claims it as a deductible expense.
- The rent is paid into your own super fund rather than a landlord's account.
- The fund pays 15% tax on that rent in accumulation phase, and 0% in pension phase.
- The property is held behind the limited recourse structure.
- Your business stops depending on someone else renewing a lease.
The conditions are strict. The property must genuinely meet the business real property test, the lease must be at full market rent on commercial terms, and the documentation must hold up in the annual audit. If you are looking at a second or third commercial asset, our guide to commercial property portfolio finance in Sydney covers how lenders assess the next one.
Buying residential property in an SMSF without borrowing
Still allowed. The ban is on the loan, not the asset.
A fund with the cash can buy a residential investment property outright, provided the purchase 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: unrelated tenants only, market rent, and no member or relative living in it.
In practice this suits very few funds. Committing $900,000 of a $1.1 million balance to a single Sydney house creates a concentration and liquidity problem that an auditor will raise. For most people who wanted a geared residential investment, the answer now sits outside super. Buying in your own name using equity from your existing home is the usual route, and our Sydney equity to investment property playbook walks through it. Our investment loans service covers the finance, and the borrowing power calculator will give you a personal-name starting figure.
The tax treatment did not change
This is worth stating plainly, because a lot of people assumed the ban was a tax change. It was not.
- Rental income: taxed at 15% inside the fund during accumulation phase, 0% in pension phase.
- Capital gains: effectively 10% on assets held more than 12 months in accumulation phase, thanks to the one-third discount, and 0% in pension phase.
- Interest on the LRBA: deductible against the fund's income.
Compared with holding the same property personally at a 47% marginal rate, the gap is large. Holding property in your own name works the other way around: the loss comes off your salary instead of sitting inside the fund. Our negative gearing explainer covers that treatment and the 1 July 2027 reforms that narrow it to new builds. That is why business owners keep using the structure for their premises even though the residential version is gone.
What it costs
| Cost | Typical range |
|---|---|
| Bare trust deed and corporate trustee | $1,500 to $3,000 |
| Loan application and establishment | $500 to $1,500 |
| Legal and conveyancing | $1,200 to $2,500 |
| Valuation | $400 to $800 |
| Stamp duty | 3% to 5% of purchase price |
| Building and pest inspection | $400 to $800 |
| Annual accounting and tax | $1,500 to $3,500 |
| Annual audit | $1,000 to $2,500 |
| Property management | 6% to 8% of rental income |
Figures are indicative and vary by provider and state. Budget roughly $5,000 to $10,000 upfront outside stamp duty, and $3,500 to $7,000 a year in ongoing compliance. Those fixed annual costs are the reason SMSF property rarely stacks up below a fund balance of about $200,000 to $300,000.
The risks that did not go away
- Concentration. One property can dominate the fund's balance sheet. A soft market hits the whole retirement plan, not a slice of it.
- Liquidity. Property cannot be sold quickly, and the fund still has to pay audit fees, insurance and pensions on schedule.
- Serviceability. A vacancy or a rate rise has to be absorbed from fund cash or contributions, and contributions are capped.
- Compliance. A bare trust set up incorrectly, a contract signed in the wrong name, or a related party lease below market rent can all trigger serious ATO consequences.
How a commercial SMSF purchase runs, step by step
- Confirm the fund suits it. Balance, deed, investment strategy and liquidity, checked with your SMSF adviser and accountant.
- Confirm the property is business real property. Actual use, not zoning. Mixed use needs a written opinion.
- Get the loan pre-assessed. A broker checks which lenders will fund your fund, at what LVR, and what cash buffer they want.
- Set up the bare trust and its trustee. This must exist before contracts are signed.
- Sign in the correct name. The bare trust trustee is the purchaser, not the SMSF.
- Formal approval and valuation. The lender values the property and issues approval.
- Paper the lease. If your business will occupy the premises, the lease goes in at market rent on commercial terms before settlement.
- Settle, then run it properly. Rent paid on time, records kept, audit every year, and the loan cleared before the fund moves fully into pension phase.
Step 3 is where a broker earns their keep. The SMSF lender panel is small and the policies differ sharply, so applying blind wastes weeks. Our specialist lending team runs these regularly.
Ready to look at the numbers?
The residential borrowing route is closed. Refinancing an existing SMSF loan and buying commercial premises through super are both still open, and both are worth a proper look rather than a guess.
RyRo Loan Centre arranges SMSF and commercial finance across a specialist lender panel, works alongside your accountant and SMSF adviser, and charges no broker fee. We are based in Norwest and work across Sydney, including as a Castle Hill mortgage broker for local business owners.
Book a free strategy call or get in touch and we will look at your fund balance, your existing loan pricing, and whether business real property stacks up for you.
Quick answers
Frequently asked questions
Only without borrowing. Since 10 August 2026 an SMSF cannot enter a new limited recourse borrowing arrangement to acquire residential property. The fund can still purchase residential property outright with its own cash if that fits the investment strategy, liquidity requirements and the sole purpose test. Arm's length rules still apply, so no member or relative can live in it or rent it. For most funds the concentration risk makes an unleveraged residential purchase impractical.
It is grandfathered. Existing residential LRBAs continue under the previous rules with no forced unwinding, no forced sale, and no requirement to repay early. Your obligations are unchanged: keep meeting the loan terms, keep the fund's liquidity buffer, keep the annual audit clean, and have a plan for clearing the debt before the fund moves fully into pension phase.
Yes. Refinancing a pre-ban residential LRBA is still permitted and does not bring the arrangement inside the ban. The expectation is that the refinance is of the existing level of debt rather than an increase, so it is a rate exercise, not a cash-out. Lender policy varies right now, so have a broker check the panel rather than assuming your current lender will match the market.
Yes. LRBAs for business real property were deliberately excluded from the ban. Business real property means real property used wholly and exclusively in one or more businesses, which covers most warehouses, workshops, suites, offices and shopfronts. Zoning alone does not qualify a property, and mixed use assets need a written opinion. See our commercial SMSF lending page for the finance side.
Yes. Business real property is excluded from the in-house asset rules, so your fund can own the premises your business trades from and lease them back. The lease has to be at genuine market rent, on commercial terms, properly documented and reviewed each year. This is the most common reason Sydney business owners hold property inside super, and it survived the 2026 changes intact.
There is no legislated minimum, but lenders and advisers generally look for at least $200,000, with $250,000 to $300,000 a more comfortable starting point. Below that, the fixed annual audit, accounting and administration costs consume too much of the return, and the fund usually fails the liquidity test once most of the balance is tied up in one asset.
Rental income is taxed at 15% during accumulation phase and 0% in pension phase. Capital gains on assets held more than 12 months are effectively taxed at 10% in accumulation phase because of the one-third discount, and 0% in pension phase. Interest on the LRBA is deductible against fund income. None of this changed with the borrowing ban.
Generally yes. The legislation included a 45 day transition from Royal Assent on 26 June 2026, and where the contract of sale was entered into before commencement the purchase can proceed even though settlement falls after that date. Establishing the fund, lodging an application or holding an approval in principle does not count as a contract. Have your SMSF adviser confirm your specific arrangement in writing before loan documents are signed.
Repairs and maintenance are fine. Improvements have to be funded from the fund's own cash rather than borrowed money, and they cannot change the character of the property while the LRBA is outstanding, so no knockdown rebuild and no major structural extension. Once the loan is repaid the restriction lifts. This rule predates the 2026 ban and is unchanged by it.
Two realistic options. Buy in your own name, usually funded by releasing equity from your existing home, which keeps full lender competition on the table and, for a new build or a property you already held at 7:30pm AEST on 12 May 2026, negative gearing too. Or, if you run a business, redirect the fund toward buying your own premises. Which one wins depends on your marginal tax rate, fund balance and timeline. A broker and your accountant should map both before you commit.
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