SMSF borrowing rules have changed. Here’s what it means for you.
From 10 August 2026, a new limited recourse borrowing arrangement (LRBA) can only be used to buy business real property. Residential property can no longer be bought with an SMSF loan. Existing loans are protected.
From Budget measure to law
The change is in Schedule 5 of the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which amends section 67A of the SIS Act.
What your SMSF can and can’t borrow for
The test is how the property is used, not how it is zoned. Business real property must be used wholly and exclusively in one or more businesses.
Business real property
- Offices, shops and medical suites
- Warehouses, factories and industrial units
- Your own business premises, leased back at market rent
- Farmland used in primary production (home on up to 2 ha)
Residential property
- Houses, units, townhouses and apartments
- Off-the-plan residential (contract after 10 Aug 2026)
- Land held for a future home
- Lifestyle blocks and hobby farms
Your SMSF can still buy these with cash.
Grey areas
- Mixed-use (shop with a flat above)
- Vacant land
- Short-stay, holiday or serviced accommodation
- Commercial premises not yet in business use
These often fail the “wholly and exclusively” test. We check each one before you sign.
Can my SMSF borrow for this property?
General information only. We confirm eligibility on a free call before you exchange contracts. For loan size, cash and repayments, use the SMSF borrowing calculator.
What’s protected
Existing LRBAs
Loans entered into before 10 August 2026 continue on their current terms. Keep the bare trust, loan terms and arm’s-length records in order.
Refinancing
You can refinance an existing LRBA. Keep the balance at or below what you currently owe. Topping up, releasing equity or changing the security could be treated as a new arrangement, which the ban would catch.
Contracts already exchanged
A binding contract exchanged before 10 August 2026 is protected, even if it settles or the loan is signed later. A finance application or a new SMSF on its own doesn’t count.
Four ways to hold property in an SMSF after the ban
Buy residential with cash
Use the fund’s balance, or a couple’s combined balances, to buy outright. No bare trust needed.
How to buy →Borrow for commercial
Use an LRBA for business real property, including premises leased to your own business.
Commercial property →Transfer business property in
Members can transfer business real property into the fund at market value, as a contribution or a sale.
Learn more →Unit trusts
Ungeared related unit trusts (reg 13.22C) and widely held unrelated trusts have strict rules. Get advice before using one.
Talk to us →LRBA changes: common questions
Does the ban only apply to new SMSFs?
No. It applies to any LRBA entered into on or after 10 August 2026, whether the fund was set up last week or in 2012.
Does it apply to loans from a related party?
Yes. The restriction is on the asset an LRBA can acquire, so it applies to bank, non-bank and related-party lenders alike. Related-party LRBAs for business real property must still follow the ATO’s safe harbour terms (PCG 2016/5).
Can my SMSF still borrow to buy shares?
Yes. The change only affects real property. LRBAs over other permitted assets, such as listed shares, are unaffected.
What happens if a fund breaches the new rule?
An LRBA that doesn’t meet section 67A breaches the borrowing prohibition in section 67. Penalties include an administrative penalty of 60 penalty units per trustee, rectification directions and, in serious cases, a non-complying fund taxed at 45%.
I already own a residential property through an LRBA. Do I need to do anything?
Not because of the ban. Your loan continues. Talk to us before refinancing, repairing or improving the property, because changes to the loan or the asset can affect its protected status.
Is a holiday rental or serviced apartment business real property?
Usually not. Short-stay dwellings are often residential premises, even when they are rented commercially. Some genuine accommodation businesses can qualify. We check the facts before you commit.
Not sure where your property fits?
We’ll look at the property, your contract date and your balance and tell you which path works.
1300 545 516General information only, current as at 24 September 2026. It does not consider your personal circumstances. Sources: ATO “Changes to LRBAs for property from 10 August”; Treasury Laws Amendment (Tax Reform No. 1) Act 2026, Schedule 5.