SMSF Borrowing Changes from 10 August 2026
From 10 August 2026, a limited recourse borrowing arrangement can only be used by a self-managed super fund to acquire business real property. Residential property is not business real property. In plain terms, an SMSF can no longer borrow to buy a residential investment property, including off-the-plan apartments, townhouses and house and land packages.
Where this comes from
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026. It changes the limited recourse borrowing arrangement provisions that apply to self-managed super funds, and the new rules apply to arrangements entered into on or after 10 August 2026.
What is not affected
This is the part most commentary skips, and it is where most of the practical relief sits. On the ATO's guidance, the following are unaffected:
- Existing LRBAs entered into before 10 August 2026. They continue as they are.
- Refinancing of those existing arrangements.
- Binding contracts to acquire real property exchanged before 10 August 2026, even if the contract settles, or the borrowing is entered into, after that date.
Why the third point matters so much in off-the-plan
Off-the-plan is the one part of the market where contracts routinely exchange one to four years before settlement. A fund that exchanged a binding contract in, say, June 2026 on a development completing in 2028 sits on the unaffected side of the line, on the ATO's stated position, even though the money will not move for two more years.
Whether a particular contract is binding for this purpose is a legal question, not a property one. It is exactly the sort of thing to put in front of your accountant and your solicitor rather than assume.
What an SMSF can still do
Buy residential property outright. The restriction is on borrowing, not on ownership. A fund with sufficient cash can still acquire residential property, subject to its investment strategy, the sole purpose test, liquidity, diversification and the rest of the superannuation rules.
Borrow to acquire business real property. Commercial premises remain within scope. If anything, the effect of the change is to narrow SMSF borrowing to exactly that.
What we think this means, and what we are not saying
Our honest read is that this is a policy pivot away from leveraged residential property inside superannuation, and that funds relying on gearing to enter the residential market will need a different plan. That is an observation about the market, not advice about your fund.
We are deliberately not telling you whether to rush a contract before 10 August, whether to buy outright, or whether an SMSF suits you at all. Nobilis is a property advisory. We are not licensed to give financial, superannuation, taxation, legal or credit advice, and a decision of this kind should never be made on the basis of a property firm's website.
Questions we are being asked
Can my SMSF still borrow to buy a residential investment property?
Not if the borrowing is entered into on or after 10 August 2026. From that date a limited recourse borrowing arrangement can only be used to acquire business real property, and residential property does not meet that definition. Existing arrangements are unaffected.
What counts as business real property?
Broadly, land and buildings used wholly and exclusively in a business. A commercial premises your own business trades from is the common example. A residential apartment, townhouse or house rented to a tenant is not business real property, whatever the fund's intention. The precise test is a matter for your accountant and the ATO definition.
I exchanged an off-the-plan contract in June 2026 and it settles in 2028. Am I affected?
On the ATO's guidance, no. Binding contracts to acquire real property exchanged before 10 August 2026 are unaffected, even where the contract settles or the borrowing is entered into after that date. This matters a great deal in off-the-plan, where contracts routinely exchange years ahead of settlement. Confirm your specific position with your adviser, because whether your contract is binding for this purpose is a legal question.
Can my SMSF still buy residential property outright?
Yes. The restriction applies to borrowing, not to ownership. A fund with sufficient cash can still acquire residential property, subject to its investment strategy, the sole purpose test, liquidity, diversification and the other superannuation rules. Whether it should is a different question and one for your licensed adviser.
What happens to my existing LRBA?
Nothing. Arrangements entered into before 10 August 2026 continue, and refinancing them is also unaffected.
Does this change apply to commercial property?
No. Business real property is precisely what the new rules still permit. If anything, the change narrows SMSF borrowing to commercial premises.
General information only, current at the date shown. Nobilis Property Group provides property advisory services and does not provide financial, superannuation, taxation, legal or credit advice. Nothing here is a recommendation to establish a self-managed super fund, to borrow, or to acquire property through a fund. Obtain advice from your licensed financial adviser, qualified accountant and, where borrowing is involved, your credit adviser before making any decision.