The rules for Self Managed Super Fund borrowing changed on 10 August. Explore our FAQ's below.
What is changing?
SMSF Finance is undergoing a significant change in relation to property lending rules. From 10 August 2026, a Self-Managed Superannuation Fund (SMSF) may use a Limited Recourse Borrowing Arrangement (LRBA) to acquire real property only if that property meets the definition of “Business Real Property” under section 66 of the Superannuation Industry (Supervision) Act 1993 (SIS Act).
SMSF & Property 2026 FAQs
Can I still borrow to fund a residential property purchase in my SMSF?
Not after 10 August 2026. From 10 August 2026, new LRBAs will generally be ineligible to acquire residential property because residential dwellings do not satisfy the Business Real Property (BRP) test.
What is Business Real Property?
Business Real Property is property used wholly and exclusively for one or more businesses, as defined in section 66 of the SIS Act. From 10 August 2026, real property acquired under a new LRBA must satisfy this test.
Standard examples include commercial offices, industrial warehouses and factories, and retail premises and shopfronts.
Non-standard examples include specialised accommodation (motels, hotels, caravan parks), aged care, childcare, and farm and rural properties.
What is the Business Real Property test?
The key question is whether the property is used wholly and exclusively for one or more businesses. Accordingly, some residential property used exclusively as business premises may qualify, while some commercial property may not. Examples that may not qualify include mixed-use properties, vacant land, lifestyle blocks, and possibly newly built or off-the-plan premises not yet in business use. These edge cases remain subject to further ATO guidance.
Are existing LRBAs affected?
No, these arrangements are grandfathered under the prior rules. Existing LRBAs, refinancing of existing arrangements, and new arrangements where contracts are exchanged before 10 August 2026 (even if settlement occurs later) are protected and do not need to be unwound.
Will an SMSF be able to purchase a residential property outright?
Yes, an SMSF can still acquire residential property outright with fund cash, subject to its investment strategy and the usual SIS Act rules.
Can an existing residential property purchased using an LRBA be refinanced after 10 August?
In most cases, yes, you can, unless there is a material change, which may include switching lenders. We are expecting further ATO guidance on the rules relating to refinancing.
Can an SMSF still lease a leveraged commercial property to a business?
Yes, business owners can still use an LRBA to acquire qualifying business premises and lease them back to their operating entity at market rates.
Are SMSFs still worthwhile for acquiring commercial property?
Historically, SMSFs are primarily used to acquire commercial property rather than residential property. As a result, SMSF residential borrowing accounts for under 1% of Australia’s residential mortgage market. There are over 672,800 SMSFs in Australia*, and under 10,000 funds hold residential property under an LRBA. The 2026 reform therefore affects a niche investor strategy rather than the entire SMSF sector. Business Real Property (BRP) is now the gateway for all new SMSF borrowing. *ATO SMSF Quarterly Statisctical Report, March 2026.
How do I learn more about SMSFs & Property Investment?
Mortgage Link's SMSF & Property Investment (Edition 2, 2026) may provide further insights. The Guide is available as a PDF download and includes a useful SMSF Borrowing Checklist.
This article is general information only. The business real property test and the transitional rules are technical, and some edge cases are still being clarified. Confirm the position for any specific transaction with your accountant, adviser and solicitor before acting. MCP provides credit assistance only and does not provide superannuation, taxation, investment or other financial product advice. Establishing or contributing to an SMSF requires advice from an appropriately licensed adviser.