SMSF Property Rules Changed on 10 August 2026: New Borrowing Can Only Buy Business Real Property
SMSF property rules changed on 10 August 2026: according to the Australian Taxation Office (ATO), a new limited recourse borrowing arrangement (LRBA) can only buy real property that is business real property, so a self-managed super fund (SMSF) can no longer borrow to buy an ordinary home. Loans entered and contracts exchanged before 10 August, and later refinancing, are not affected, and an SMSF can still buy a home with its own money.
On 20 October 2026, realestate.com.au reported that, with SMSF borrowing for residential property closed off, some investors are turning their attention to commercial property. The change comes from the Treasury Laws Amendment (Tax Reform No. 1) Act 2026. Parliament agreed to the relevant amendment on 25 June 2026, the Act received Royal Assent on 26 June, and it amends the LRBA rules in the Superannuation Industry (Supervision) Act 1993.
Key Points
- Who should pay attention: anyone with super in Australia who already holds property in an SMSF or is planning to buy property through one, including professionals who have moved to Australia and are thinking about using their super for property.
- What changed on 10 August is what a new LRBA can buy: real property must be business real property, and it must stay that way for the whole life of the loan. LRBAs themselves are not banned.
- Existing loans, refinancing and contracts exchanged before 10 August are not affected. An SMSF can still buy a home with its own money, but the existing related-party and in-house asset rules still apply.
- This article explains the rules only and is not investment or tax advice. Speak to a licensed financial adviser and an SMSF specialist before acting.
SMSF Property Borrowing Before and After 10 August
Everything in this table comes from the ATO pages “Changes to limited recourse borrowing arrangements” (updated 26 October 2026) and “Changes to LRBAs for property from 10 August” (updated 29 July 2026):
| Situation | Before 10 August | From 10 August |
|---|---|---|
| New LRBA to buy an ordinary home | Allowed (other rules apply) | Not allowed |
| New LRBA to buy business real property | Allowed | Allowed; must be business real property when the LRBA starts and for its whole life |
| LRBA entered before 10 August | — | Not affected; can be maintained |
| Refinancing an existing LRBA | — | Not affected (same asset, same or new lender) |
| Binding contract exchanged before 10 August | — | Not affected, even if it settles or the LRBA starts later |
| SMSF buys a home with its own money | Allowed | Still allowed, but not financed under an LRBA |
| Lender is a bank, non-bank or related party | — | Rules apply to all; what matters is whether it is an LRBA |
| Several property titles treated as one asset | — | Must also be business real property |
Who Is Affected: Existing Loans, Signed Contracts and New Plans
SMSFs that already bought a home under an LRBA
The ATO is clear: real property financed under an LRBA entered before 10 August 2026 does not need to be business real property, and maintaining or refinancing that loan afterwards is not affected. The ATO treats refinancing as entering into a new loan contract for the same asset, with the same or a new lender. Its pages do not separately address borrowing more when refinancing or switching to a different asset, so check before making those changes.
Buyers who exchanged contracts before 10 August
If an SMSF exchanged a binding contract to buy real property before 10 August 2026, the changes do not apply, even if settlement or the LRBA happens later. The ATO’s example is an off-the-plan purchase: contract exchanged before 10 August, finance approved after it, settlement 12 months later, and the old rules still apply. The ATO also notes that if a contract is changed so significantly that its fundamental terms no longer exist, it may be treated as a new arrangement.
SMSFs planning a purchase after 10 August
From 10 August, any new LRBA used to buy real property must buy business real property. A residential property that itself meets the business real property definition can still be financed under an LRBA, but it must qualify when the LRBA starts and throughout its life. This applies whoever the lender is: a bank, a non-bank lender or a related party.
What Can an SMSF Still Do With Property?
Buy a home with the fund’s own money
The ATO states that an SMSF can still invest in residential property that is not business real property, provided it meets all other regulatory rules, but it cannot be financed under an LRBA. In practice, the fund needs enough of its own money to pay for it.
Use an LRBA for business real property: the conditions
The conditions below come from the ATO’s “Changes to limited recourse borrowing arrangements” and its ruling SMSFR 2009/1:
| Condition | What it means |
|---|---|
| Basic definition | Generally, land and buildings used wholly and exclusively in one or more businesses |
| Primary production property with a home | Can still qualify if the dwelling sits on no more than 2 hectares and the main use of the whole property is not private or domestic |
| When the LRBA starts | Must already be business real property |
| During the loan | Must remain business real property for the whole life of the LRBA |
| If it stops qualifying | The SMSF breaches the borrowing rules and compliance action may apply; once business use resumes the breach stops, but consequences remain for the breach period |
| Leased commercial premises between tenants | Does not stop qualifying only because the owner is looking for a new tenant; it stops if the owner abandons plans to lease it |
| Business or occupancy approvals delayed | The SMSF must show the business had started when the LRBA was entered into and that the property will be used in it |
Use an LRBA for other assets
The ATO stresses that LRBAs are not banned. An SMSF can still borrow under an LRBA to buy other acquirable assets, and how LRBAs operate has not changed; only the range of real property has narrowed. Each asset class has its own rules, such as the separate LRBA rules the ATO sets for listed shares, so check them individually.
Existing SMSF Property Rules That Still Apply
The new rules only narrowed the real property an LRBA can buy. The existing investment restrictions remain. Everything below comes from the ATO pages “What are the SMSF investment restrictions?” and “Rules on assets under LRBA”:
| Rule | What it means |
|---|---|
| Present-day benefit | No one associated with the SMSF should get a present-day benefit from its investments |
| Buying from related parties | Generally not allowed; exceptions include business real property and listed securities at market value |
| In-house asset limit | In-house assets cannot exceed 5% of the fund’s total market value; an asset leased to a related party is an in-house asset, but business real property leased to a related party is an exception |
| Improving an existing asset | An LRBA cannot be used to improve an existing fund asset, such as building a house on vacant land the SMSF owns |
| Existing assets | An existing fund asset cannot be put into an LRBA |
| Consequences of breaches | Penalties, the fund being made non-complying, trustee disqualification and prosecution |
Common Misconceptions About the New SMSF Property Rules
- “SMSFs can no longer buy property.” Not quite. What is no longer allowed is a new LRBA to buy an ordinary home. Buying a home with the fund’s own money, or buying business real property under an LRBA, is still possible. Tip: separate “what you buy” from “how you pay for it”.
- “Existing LRBAs must be wound up.” Wrong. LRBAs entered before 10 August can be maintained and refinanced. Tip: if refinancing would change the amount borrowed or the asset, check whether it is still the same arrangement.
- “Borrowing from family or my own company doesn’t count.” Wrong. The ATO says the rules apply to every lender, including related parties. Tip: the test is whether it is an LRBA, not where the money comes from.
- “Once it’s business property, I can use it however I like.” Not so. Business real property under an LRBA must stay in business use for the whole loan, or the fund breaches the borrowing rules. Tip: keep records showing you are looking for a tenant if it is vacant.
- “Leasing a home to a company makes it business real property.” Not necessarily. The test is whether it is used wholly and exclusively in a business, and cases differ widely. Tip: rely on the ATO ruling SMSFR 2009/1 and professional advice.
Scenarios: How Three SMSF Holders Might Read the New Rules
Scenario 1: A family who moved to Sydney and bought an apartment through an LRBA in 2024. The loan was entered before 10 August, so it is not affected, and they can refinance with a new lender. The open question is borrowing more or switching property at refinance, which the ATO pages do not address, so they should ask an SMSF specialist first.
Scenario 2: An investor who exchanged an off-the-plan contract in early August, with finance approved in September. The contract was exchanged before 10 August, so, following the ATO’s own example, the old rules apply. The risk is a later major change to the contract, such as switching units or changing fundamental terms, which could be treated as a new arrangement.
Scenario 3: A professional who recently moved to Melbourne and wants to set up an SMSF to buy property. A new SMSF that wants to borrow for real property can only look at business real property and must keep it in business use for the whole loan. Buying a home means using the fund’s own money, while still meeting the rules on present-day benefit and related-party purchases. Whether it suits them is a question for a licensed financial adviser.
SMSF Property in Australia: Frequently Asked Questions
Can an SMSF still buy property?
Yes, but in narrower ways. From 10 August 2026, a new LRBA used to buy real property can only buy business real property, so an SMSF can no longer borrow to buy an ordinary home. It can still buy a home with its own money, provided it meets the other rules, such as not buying from members or related parties and not giving anyone associated with the fund a present-day benefit. Get advice from a licensed adviser before acting.
I bought SMSF property under an LRBA before 10 August. Do I need to do anything?
Not because of the new rules. The ATO says real property financed under an LRBA entered before 10 August does not need to be business real property, and maintaining or refinancing that loan is not affected. Refinancing means a new loan contract for the same asset, with the same or a new lender. The ATO pages do not separately cover borrowing more or switching assets, so check first.
Can my SMSF borrow from family or my own company to buy SMSF property?
If the arrangement is an LRBA, the new rules still apply. The ATO says that whether the lender is a bank, a non-bank lender or a related party, a new LRBA from 10 August can only buy business real property. SMSFs are also already restricted from lending or giving financial help to members and their relatives, so have any such arrangement reviewed by a professional.
What counts as business real property?
The ATO says it generally means land and buildings used wholly and exclusively in one or more businesses. Primary production property with a home can still qualify if the dwelling sits on no more than 2 hectares and the main use of the whole property is not private or domestic. The ATO ruling SMSFR 2009/1 has the detail, and individual cases vary, so rely on professional advice.
What if my business property bought under an LRBA is temporarily vacant?
It depends. The ATO says leased commercial premises do not stop being business real property only because the owner is looking for a new tenant, but they do if the owner abandons plans to lease them. If the property stops qualifying, the fund breaches the borrowing rules; the breach stops once business use resumes, but consequences remain for the breach period.
Is SMSF property still worth it after the change?
That depends on your fund balance, age, retirement plans and cash flow, and this article does not give investment advice. The change only stops new LRBAs for ordinary homes. Buying a home with the fund’s own money and buying business real property under an LRBA are still possible, but they differ in how much money they need, their risks and their compliance demands. A licensed financial adviser can help you decide.
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Important Disclaimer
This article is general information and is not legal, tax, financial or investment advice, and it does not suggest any investment or super arrangement is right for you. It is based mainly on official information published in 2025 and 2026 by the Australian Taxation Office (ATO) and the Federal Register of Legislation, and on media reporting from October 2026. SMSF rules and ATO guidance may change, and individual circumstances vary widely. Speak to a licensed financial adviser, an SMSF specialist or a registered tax agent before acting.
The rules in this article are current as of 26 October 2026; check the latest ATO guidance.
References
Australian Taxation Office (ATO) – Changes to LRBAs for property from 10 August (updated 29 July 2026) / Australian Taxation Office (ATO) – Changes to limited recourse borrowing arrangements (updated 26 October 2026) / Australian Taxation Office (ATO) – Limited Recourse Borrowing Arrangement (LRBA) Provisions (7 July 2026) / Australian Taxation Office (ATO) – Rules on assets under LRBA (updated 3 August 2026) / Australian Taxation Office (ATO) – What are the SMSF investment restrictions? / Federal Register of Legislation – Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Act No. 49, 2026) / realestate.com.au – SMSF residential borrowing banned as property investors pivot to commercial real estate (20 October 2026)
