can your SMSF still borrow to buy property?

You may have heard that SMSFs can no longer borrow to buy property. But that isn’t quite the full story. 

From 10 August 2026, new rules restrict the types of real property an SMSF can acquire using a limited recourse borrowing arrangement [LRBA]. 

While new LRBAs can generally no longer be used to purchase residential investment property, SMSFs may still be able to borrow to acquire eligible business real property. Existing arrangements and some transactions already underway before the changes may also be protected. 

So, can your SMSF still borrow to buy property? The short answer is yes, but there are some important restrictions to understand. 

This is what you need to know. 

 

first, what is an LRBA? 

 

Super funds are generally prohibited from borrowing money. An LRBA is one of the limited exceptions available to an SMSF. 

Under an LRBA, the SMSF borrows to acquire a single asset. The asset is held in a separate holding trust and, if the loan defaults, the lender’s rights are generally limited to that asset rather than the fund’s other assets. 

LRBAs are complicated arrangements and the order matters. The contract, loan, holding trust and ownership structure all need to be established correctly, so it is important to get advice before signing a purchase contract. 

 

what changed on 10 August 2026? 

 

The change is narrower than some of the headlines suggest. LRBAs have not been completely banned. 

For LRBAs entered into on or after 10 August 2026 for real property the property itself must meet the definition of business real property both when the LRBA is entered into and ongoing, whilst the loan arrangement remains in place. 

In practical terms: 

• A new LRBA generally cannot be used to acquire an ordinary residential investment property. 
• A new LRBA may still be used to acquire eligible business real property. 
• The restriction applies to borrowing, not to an SMSF owning residential property altogether. So, if you have the cash to fund a residential property purchase via your fund – you can still do this! [see below] 
• Existing LRBAs and certain property transactions already underway before 10 August 2026 may continue under the earlier rules. 

 

can your SMSF still buy residential property? 

 

Potentially, yes – but generally not using a new LRBA. 

An SMSF may still be able to purchase residential property outright using available fund cash, provided the acquisition complies with the usual super rules. For example, the investment must be permitted by the fund’s trust deed, align with its investment strategy and satisfy the sole purpose test. 

Residential property generally cannot be: 

• Acquired from a related party of the fund. 
• Lived in by a member or a member’s relative. 
• Rented to a member, a member’s relative or another related party. 

The key change is that, for new arrangements, an SMSF generally cannot borrow through an LRBA to fund the purchase of ordinary residential investment property. 

 

already have an LRBA? 

 

If your SMSF entered into an LRBA before 10 August 2026, the new business real property requirement generally does not apply to that existing arrangement. 

This means an existing residential property LRBA does not need to be unwound simply because the law has changed. Repayments can continue and a genuine refinance may still be possible, provided the refinancing satisfies the relevant LRBA requirements. 

 

signed a contract before 10 August? 

 

Transitional treatment may apply where an SMSF entered into a binding contract to acquire real property before 10 August 2026. 

The earlier rules may continue to apply even if: 

• Settlement occurs on or after 10 August 2026. 
• The LRBA is entered into on or after that date. 

Whether a transaction is protected will depend on the timing and terms of the binding contract, so it is important to have the documents reviewed before relying on the transitional rules. 

 

what counts as business real property? 

 

Broadly, business real property is an interest in real property used wholly and exclusively in one or more businesses.  

The property needs to qualify when the LRBA is entered into and continue to qualify throughout the borrowing arrangement. A temporary vacancy may not automatically cause a problem where the property is still genuinely being held for business use, but a permanent change to private or non-business use could put the arrangement at risk. 

The business real property definition can be more complicated than it first appears, for example storage of personal assets on a business property can fail the “wholly and exclusively” definition.  So, it’s important you seek advice on what meets the business real property definition. 

 

could your SMSF buy your business premises? 

 

For business owners, this is where LRBAs may still have an important role. 

An SMSF may be able to acquire eligible business premises and lease them to a related business, provided the property qualifies as business real property and the arrangement is conducted on arm’s-length terms. 

This can allow a business owner to build retirement wealth while their business occupies the premises. However, it also concentrates more of the owner’s wealth and retirement savings in one property and one business ecosystem. 

Before proceeding, consider: 

• Whether the property genuinely qualifies as business real property. 
• Whether the lease and rent are on commercial terms. 
• How the deposit, purchase costs and loan repayments will be funded. 
• Whether the fund will retain enough cash for tax, expenses and member benefits. 
• What happens if the business moves, closes or can no longer pay rent.

 

don’t let the tax outcome make the decision

 

Depending on your circumstances, recent tax changes may make holding investments through super look increasingly attractive compared with owning them outside super. But tax is only one part of the decision. 

Property is illiquid, borrowing increases risk and SMSF rules can limit what you can do with the asset. The structure needs to work from an investment, cash flow, compliance, retirement and estate planning perspective. 

For some business owners, acquiring eligible business premises through super may still be a valuable long-term strategy. For others, the concentration, borrowing and liquidity risks may outweigh the potential benefits. 

The right answer will depend on the property, the business, the fund and the people behind it. 

 

we’re here to help 

If you’re considering buying property with super or have questions about an existing LRBA, reach out to me, your usual businessDEPOT adviser or give us a buzz on 1300 BDEPOT.

 

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general advice disclaimer

Business Depot Financial Planning BNE Pty Ltd ABN 27 644 561 400 and its advisors are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL No. 357306.

The information provided on this website is a brief overview and does not constitute any type of advice. We endeavour to ensure that the information provided is accurate however information may become outdated as legislation, policies, regulations and other considerations constantly change. Individuals must not rely on this information to make a financial, investment or legal decision. Please consult with an appropriate professional before making any decision.