If you hold property inside a Self-Managed Super Fund (SMSF), or have been considering it, recent legislation has changed some of the rules around how SMSFs can borrow to purchase residential property. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026, and the relevant change takes effect from 10 August 2026.
This guide explains what changed, what remains available, and what different trustees may want to think about as a result. It covers the rules as they stand from 10 August 2026 onward, with the aim of giving trustees a clear picture of where they stand.
Every fund’s position is different, and the right response depends on the fund’s current assets, its investment strategy, the circumstances of its members, and the specific property arrangements it holds or is considering. This content is general information only and does not constitute financial, legal, or tax advice.
Individual circumstances vary considerably, and speaking with a licensed financial adviser, accountant, and mortgage broker before making any fund decisions is strongly recommended.
What the Legislation Changed
The Act inserted a new condition into Section 67A(2) of the Superannuation Industry (Supervision) Act 1993. From 10 August 2026, any real property acquired through a Limited Recourse Borrowing Arrangement inside an SMSF must be business real property as defined under Section 66 of the same Act.
Residential property does not meet that definition, so SMSFs can no longer enter into new LRBAs to purchase residential property from 10 August 2026 onward.
Commercial property borrowing arrangements are unaffected, as commercial premises used wholly and exclusively in a business typically meet the business real property definition. For plain-language explanations of terms like LRBA and bare trust, the mortgage glossary is a useful reference.
The table below summarises what changed and what did not.
| Category | Status From 10 August 2026 |
| New residential property LRBA | Not permitted |
| Existing residential property LRBA | Continues as normal |
| Refinancing an existing residential LRBA | Still permitted |
| Residential property purchased with SMSF cash | Still permitted |
| Commercial property LRBA | Still permitted, unchanged |
| SMSF tax rates (15% accumulation, 0% pension phase) | Unchanged |
| SMSF capital gains tax concessions | Unchanged |
What Stays the Same for Existing Arrangements
The legislation is prospective rather than retrospective. Arrangements entered into before 10 August 2026 are protected under the Act, meaning a borrowing arrangement already in place, or one where the acquisition contract was signed before commencement, continues under the existing LRBA rules even if settlement occurs after that date.
This means an SMSF that already holds residential property under an LRBA can continue that arrangement without any change to the loan terms, the bare trust structure, or the fund’s ongoing obligations.
Refinancing an existing residential LRBA with a different lender also remains available, and for trustees whose loan has not been reviewed recently, that is worth considering regardless of the legislative change.
For trustees in this position, no structural action is required as a direct result of the legislation. The legislation’s protection extends to settlement occurring after the commencement date, provided the contract was entered into before 10 August 2026. Trustees who exchanged contracts before that date but are yet to settle are also unaffected, though confirming this with your SMSF accountant is recommended if there is any uncertainty. The refinancing service covers what a loan review process involves for existing arrangements.
What Commercial Property LRBAs Still Offer
Borrowing inside an SMSF to purchase commercial property is completely unaffected by the change. Business real property, which typically includes shops, offices, warehouses, factories, and other commercial premises used wholly and exclusively in a business, continues to meet the LRBA requirements under the Act.
For business owners, this preserves the ability to hold business premises inside their super fund and pay market rent into the fund. The property grows within a concessionally taxed environment, rental income is taxed at 15 per cent during accumulation, and assets held for more than 12 months can attract capital gains concessions in the pension phase.
Many business owners use this structure as part of a long-term retirement strategy, and the business loans and commercial finance page covers the broader lending landscape for those considering this path.
Specialist non-bank lenders continue to actively service commercial SMSF lending, particularly since major banks reduced their involvement in this space. A broker with access to a wide panel of SMSF-friendly lenders can identify which institutions offer the most suitable terms for your fund’s structure and property type.
The table below outlines the key features of commercial SMSF lending:
| Feature | Commercial SMSF Lending |
| Maximum LVR | Up to 70 per cent |
| Minimum SMSF balance | $150,000 to $200,000 combined |
| Liquidity buffer required | 15 to 20 per cent of loan amount post-settlement |
| Documentation required | Two years business financials, BAS, lease agreements, valuation |
| Who it suits | Business owners, commercial property investors with compliant SMSFs |
Residential Property Inside an SMSF Without Borrowing
The legislation only affects how residential property can be financed inside an SMSF using borrowed funds. It does not affect the ability to hold residential property inside the fund using existing cash assets. An SMSF can still acquire residential property outright, provided the acquisition fits the fund’s investment strategy, is made at arm’s length, and the fund maintains adequate liquidity after purchase.
The standard rules that have always applied to SMSF residential property remain in force. Members and related parties cannot live in or rent the property.
Any rental income and capital gains flow back into the fund for the benefit of members’ retirement, and the fund must demonstrate the acquisition fits within its documented investment strategy.
Trustees considering a cash property purchase inside super will need to ensure the fund holds sufficient liquidity after the acquisition, as the ATO places emphasis on the fund’s ability to meet its ongoing obligations. Speaking with a financial adviser before committing to an acquisition is strongly recommended. The how much can I borrow calculator is a useful reference for understanding fund capacity, and the investment property loans page outlines property investment options both inside and outside of an SMSF structure.
The Broader SMSF Structure Is Unchanged
The change is specific to new residential property LRBAs. The broader tax treatment of SMSFs remains exactly as it was: income during accumulation is taxed at 15 per cent, eligible pension income in pension phase is taxed at zero per cent, and the capital gains discount on assets held for more than 12 months continues to apply.
SMSFs can still hold a wide range of assets including shares, managed funds, ETFs, bonds, and commercial property with or without borrowing, and the 2026 change does not alter the fundamental case for using an SMSF to build retirement wealth.
For trustees whose fund strategy does not involve residential property borrowing, or who invest entirely in non-property assets, nothing about the fund’s operation changes as a result of this legislation.
The SMSF structure continues to offer the same tax advantages, the same flexibility across asset classes, and the same compliance obligations that applied before the change.
Reviewing overall fund strategy periodically with a financial adviser is good practice, simply to ensure the investment strategy remains current and properly documented in line with ATO requirements. Annual reviews are particularly useful as a fund’s member circumstances, investment horizon, and balance evolve over time.
What Different Trustees May Want to Consider
The appropriate response to the legislation varies depending on each fund’s position. The following is a general overview of how the change may apply in different situations, not personal advice.
- Trustees with an existing residential LRBA. The arrangement continues unchanged. Refinancing to a better rate remains available and may be worth reviewing if the current loan has not been assessed recently.
- Trustees considering commercial SMSF lending. LRBAs for commercial property remain fully available. A broker experienced in SMSF lending can help assess lender options and documentation requirements across a wide panel of institutions.
- Trustees whose strategy did not involve residential property borrowing. Nothing changes for the fund as a result of this legislation. The tax rates, asset class options, and compliance requirements that applied before the change continue in exactly the same form.
- Trustees considering property investment outside of super. The services page outlines the full range of lending services available, including options for trustees working through their fund strategy.
In all cases, taking advice from a licensed financial adviser and specialist broker before making any changes to fund strategy is the recommended approach. SMSF structures are complex, individual fund circumstances vary considerably, and the 2026 legislation is recent enough that professional guidance remains important before acting on any of the above paths.
A broker experienced in SMSF lending can work through the options across a wide panel of lenders and help identify the most appropriate path for your fund’s balance, asset mix, and retirement timeline. For trustees based in the Sutherland Shire and greater Sydney, FirstPoint’s team is familiar with the local market and the lenders that operate within it.
Getting that institutional knowledge early in the process tends to save time and avoid applications that are poorly matched to a fund’s specific profile. The team works across both residential LRBA reviews for existing arrangements and new commercial SMSF applications, and can provide a straightforward initial assessment of your fund’s position relative to the legislative change and what options remain open to you.
Talk to an SMSF Specialist at FirstPoint
FirstPoint has worked with SMSF trustees across the Sutherland Shire and greater Sydney on loan structuring, lender selection, and compliance coordination from fund setup through to settlement.
The SMSF lending service covers commercial SMSF applications and reviews of existing arrangements, and the team can work through the options with you in a straightforward way.
Whether you want to understand how the rule change affects your fund, explore commercial SMSF lending, or review an existing arrangement, reach out to the FirstPoint team to book a free consultation.
The conversation is obligation-free and focused on giving you a clear picture of where your fund stands and what options remain available. The team can also help you work out which questions are most useful to bring to your financial adviser and accountant, and can provide an honest initial view of how the change applies to your fund’s specific circumstances and assets.
Frequently Asked Questions
Yes, but only for commercial property. From 10 August 2026, new LRBAs can only be used to acquire business real property as defined under Section 66 of the SIS Act. Residential property does not meet that definition, so new residential LRBAs are not permitted from that date. Existing residential LRBAs continue unchanged under the protection provisions of the legislation.
No. Existing residential LRBAs are protected under the legislation. If your SMSF already holds a residential property under an LRBA, or if the acquisition contract was entered into before 10 August 2026, the arrangement continues unchanged. There is no requirement to sell, unwind, or restructure as a result of this change.
Yes. The legislation only affects the ability to use an LRBA to finance a residential property purchase. An SMSF can still acquire residential property using existing fund cash, provided the acquisition fits the fund’s investment strategy, is made at arm’s length, and the fund maintains adequate liquidity after purchase.
The standard restrictions continue to apply: members and related parties cannot live in or rent the property.
Income earned inside an SMSF during the accumulation phase is taxed at 15 per cent. Once a fund moves into the pension phase, eligible pension income is taxed at zero per cent.
Capital gains on assets held for more than 12 months attract a one-third discount on the taxable amount during the accumulation phase. These tax settings are confirmed unchanged by the 2026 legislation.
FirstPoint’s SMSF checklist confirms a minimum of $150,000 to $200,000 in combined SMSF balances as a starting point for commercial SMSF lending, with a liquidity buffer of 15 to 20 per cent of the loan amount required post-settlement.
Individual requirements vary by lender, property type, and fund structure. A broker can confirm exact requirements based on your specific situation and the lenders available to your fund.
A commercial SMSF loan typically requires two years of business financials, BAS statements, lease agreements, a professional property valuation, exit strategy documentation, a compliant SMSF Trust Deed, and a bare trust structure.
Requirements vary between lenders and a specialist broker can confirm exactly what each lender needs for your specific application.
