Self-managed super funds (SMSFs) have long provided Australians with greater control over their retirement investments, including the ability to invest in property.
However, SMSF borrowing has always been tightly restricted. In August 2026, the Federal Government introduced an important further restriction: new SMSF borrowings to purchase residential property are now prohibited.
The change does not prevent an SMSF from owning residential property, and it does not prevent SMSFs from borrowing altogether. Rather, it removes the ability to use a new limited recourse borrowing arrangement (LRBA) to acquire residential property.
This article explains what an SMSF can now buy and when borrowing is permitted.
Existing compliant LRBAs entered into before 10 August 2026 are generally not affected by the changes.
When Can an SMSF Borrow?
SMSFs are generally prohibited from borrowing money.
The major exception is an LRBA, which allows an SMSF to borrow to acquire certain permitted assets.
Under an LRBA:
- The SMSF identifies an eligible asset.
- A separate holding/bare trust acquires the asset.
- The SMSF borrows money to fund the acquisition.
- The asset is held under the LRBA structure.
- Loan repayments are made from SMSF resources.
- Once the loan is repaid, the asset remains within the SMSF structure.
The lender’s recourse is generally limited to the asset acquired under the arrangement.
The 2026 changes mean that new LRBAs can no longer be used to acquire residential property, but eligible commercial/business real property can still potentially be acquired using an LRBA.
In simple terms
| Investment | SMSF can own? | New LRBA borrowing? |
| Shares & ETFs | ✓ | Generally no |
| Managed funds | ✓ | Generally no |
| Residential property | ✓ | No |
| Commercial property | ✓ | Yes, subject to rules |
| Business real property | ✓ | Yes, subject to rules |
| Cash & term deposits | ✓ | No |
| Collectables/personal-use assets | ✓, subject to strict rules | Generally no |
Can an SMSF Still Buy Residential Property?
Yes.
The 2026 reforms restrict borrowing, rather than residential property ownership itself.
For example:
SMSF has $700,000 cash → buys a $650,000 residential investment property
This can potentially be permitted, provided the SMSF satisfies the other investment rules.
However:
SMSF has $400,000 → borrows $600,000 under a new LRBA → buys a $1 million residential property
This is no longer permitted under the new LRBA rules.
The important distinction is:
Residential property can still be owned by an SMSF, but a new LRBA cannot be used to acquire it.
What About Commercial Property?
Commercial property remains an important area where SMSF borrowing can still be used.
An SMSF may potentially use an LRBA to acquire eligible commercial or business real property, provided the arrangement complies with superannuation legislation.
This can be particularly relevant for business owners.
For example:
SMSF → owns commercial premises → business leases premises from SMSF
A business owner may potentially have their SMSF acquire eligible business real property and lease it to their business at commercial market rates.
This can allow the business to occupy its premises while the property is held within the SMSF.
The Key Takeaways
The 2026 changes have not stopped SMSFs from investing in property.
Instead, the rules now create an important distinction:
In summary
The most important question is no longer simply “Can my SMSF buy this asset?”
You also need to ask:
“Can my SMSF borrow money to acquire this asset?”
For residential property, the answer to the first question may be yes, while the answer to the second is now no for new LRBAs.
For eligible commercial and business real property, an LRBA can still potentially provide a way for an SMSF to borrow to acquire the asset.
Because SMSF borrowing and property transactions are highly regulated, the structure should be reviewed by an appropriately qualified SMSF professional before signing a contract or entering into a loan.
If you’re interested in the SMSF structure to purchase a commercial property, or just need some clarification around your SMSF strategy, feel free to contact our office on (02) 4933 3466.
Crest Financial Services ABN 37 085 841 318, is an authorised representative and credit representative of Charter Financial Planning Ltd 35 002 976 294, Australian Financial Services Licence and Australian Credit Licence No. 234665
This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. If you decide to purchase or vary a financial product, Crest Financial Services and the licensee, its associates and the product issuer may receive fees and other benefits. The fees will be a dollar amount and/or a percentage of either the premium you pay or the value of your investments.
Please contact us on (02) 4933 3466 if you want more information.
References
Australian Taxation Office. (2026). Changes to limited recourse borrowing arrangements. ATO — Changes to limited recourse borrowing arrangements
Australian Taxation Office. (2026). Limited recourse borrowing arrangements (LRBA) provisions. ATO — LRBA provisions
Australian Taxation Office. (2025). What are the SMSF investment restrictions? ATO — SMSF investment restrictions
Commonwealth of Australia. (2026). Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Cth). Federal Register of Legislation. Federal Register of Legislation — Treasury Laws Amendment (Tax Reform No. 1) Act 2026