If you have been considering buying property through your SMSF, the changes that took effect on 10 August 2026 may have made it sound as though SMSF property borrowing has come to an end.
It hasn’t, but the options are now narrower and the distinction between residential and business property is more important than ever.
Under the new rules, an SMSF generally can no longer enter into a new limited recourse borrowing arrangement to buy an ordinary residential investment property. New borrowing may still be available for qualifying business real property, while existing residential arrangements entered into before 10 August are treated differently.
For trustees who already hold residential property through an SMSF loan, the immediate concern is often whether the loan can remain in place or be refinanced. In many cases it may be possible, provided the existing arrangement is protected and any refinance is structured correctly.
The practical message is not to make assumptions or rush a decision. Before signing a contract, refinancing an existing facility or changing how a property is used, it is worth reviewing the full picture with your broker, accountant and solicitor.
What has actually changed?
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026
received Royal Assent on 26 June 2026, with the new property borrowing rules commencing on 10 August.
The change affects limited recourse borrowing arrangements, commonly known as LRBAs. These are the structures that allow an SMSF to borrow money to acquire an asset while generally limiting the lender’s rights to that particular asset.
From 10 August, real property acquired through a new LRBA must qualify as business real property.
This means an SMSF generally cannot use a new LRBA to purchase a house or apartment that will be held as an ordinary residential investment.
It does not prevent an SMSF from purchasing residential property using its own funds, provided the investment is permitted under the fund’s investment strategy and complies with the broader SMSF rules.
SMSF property borrowing has not disappeared
There are several situations where property borrowing may still be available:
- A new LRBA may be available where the property qualifies as business real property.
- An LRBA entered into before 10 August 2026 may generally continue.
- A protected pre-10 August LRBA may generally be refinanced over the same property.
- Where a binding property acquisition contract was entered into before 10 August, transitional protection may apply even if finance or settlement occurs later.
- An SMSF may still purchase residential property without borrowing, subject to the usual SMSF requirements.
The ATO’s guidance on the new LRBA rules
provides further information about these transitional arrangements.
What does business real property mean?
Business real property broadly means an interest in land and buildings used wholly and exclusively in one or more businesses.
This may include:
- Offices and professional consulting rooms
- Retail premises
- Warehouses and factories
- Workshops and industrial property
- Other property genuinely used in business operations
With commercial property, it may be possible for an SMSF to own premises occupied by a related business, provided the arrangement meets the SMSF rules and rent is paid on commercial terms.
The property’s description or zoning does not decide the issue by itself. What matters is how the property is actually used.
A property that appears residential could potentially qualify in limited circumstances if it is used wholly and exclusively in a genuine business. Conversely, describing a property as commercial does not automatically mean it will satisfy the business real property test.
The classification should be confirmed with an appropriately qualified accountant or solicitor before entering a contract or finance arrangement.
Already have an SMSF residential property loan?
An existing LRBA entered into before 10 August 2026 does not suddenly become non-compliant because the rules have changed.
For example, if an SMSF purchased a residential investment property using an LRBA in 2024, the fund is not required to sell the property or repay the loan simply because of the August 2026 amendment.
The fund should retain clear records showing when the purchase and borrowing arrangements were entered into. If there is any uncertainty about whether the transitional provisions apply, the structure should be reviewed before making changes.
Can the existing loan be refinanced?
A protected pre-10 August LRBA may generally be refinanced over the same asset, either with the existing lender or a different lender.
That does not mean approval is automatic. The refinance must still be structured correctly and satisfy the lender’s current credit, servicing, security and documentation requirements.
Different lenders can approach SMSF loans in different ways. Reviewing the options before the current facility expires provides more time to compare the structure, rate, repayments and lender requirements without being forced into a rushed decision.
What will a lender ask you to provide?
An SMSF loan is rarely just about finding an interest rate. Lenders will generally consider the fund, its members, the trust structure, the property, the proposed debt and the supporting documents.
Depending on the lender and transaction, you may be asked to provide:
- The SMSF’s financial statements for the previous 2 years
- Personal tax returns for the SMSF members for the previous 2 years
- Between 12 months and 2 years of SMSF or industry fund statements showing contributions and account balances
- Certified copies of the SMSF trust deed and the holding or bare trust deed
- Company documentation for the relevant corporate trustees
- Identification for each member and director
- Current lease agreements and rental ledgers
- The contract for sale where a property is being purchased
Some lenders may also require corporate trustees, director guarantees and a minimum level of liquid funds remaining after the purchase or refinance. Depending on the lender, the expected liquidity buffer may be around 5% of the proposed debt.
These are lending policies rather than universal legal requirements, and they can vary considerably between lenders.
Getting the right advice before you move
An SMSF property transaction involves several separate considerations.
Your financial adviser and accountant can help you determine whether the investment is appropriate for the fund and its members. Your solicitor can advise on the contracts, trust structure and legal requirements.
My role at Compass Lending & Finance is to work through the credit and lending side. This includes reviewing lender options, identifying the documentation required, assessing potential issues before an application is submitted and acting as a central point of contact during the loan process.
I cannot advise whether you should establish an SMSF or purchase a particular investment. I can help you understand what lending options may be available and how to approach the application properly.
The 10 August changes have closed one borrowing pathway, but they have not ended SMSF property borrowing altogether.
New borrowing may remain available for qualifying business real property. Existing residential arrangements may continue, and refinancing may remain possible where the transitional provisions apply.
If you already have an SMSF residential property loan, do not assume your refinancing options have disappeared. If you are considering purchasing commercial property through your SMSF, confirm that the property and proposed structure qualify before signing a contract.
If you would like to discuss the lending side, call me on 0400 030 556. I can help you understand the available options, what lenders are likely to require and how to prepare before submitting an application.
Information current as at 31 August 2026.
General information
Any advice contained in this article is general in nature and does not take into account your objectives, financial situation or needs. It is not financial, investment, superannuation, tax or legal advice. Before acting, obtain advice from appropriately qualified professionals. Credit availability and lender requirements vary, and all applications are subject to assessment and approval.
