Can Your SMSF Still Borrow to Buy Property? What's Changed Since 10 August
For many trustees, the ability to borrow to buy property has been one of the main attractions of running an SMSF.
That changed on 10 August 2026. An SMSF can no longer use a new borrowing arrangement to buy residential property.
The ATO has since released detailed guidance on how the new rules work. If you're considering a property purchase through your fund, or you already have a loan in place, here's where things stand.
What's Changed
SMSFs borrow to buy assets through a limited recourse borrowing arrangement, or LRBA.
Under new law passed in June, any LRBA entered into on or after 10 August 2026 to buy real property can only be used for business real property.
In plain terms, business real property is land and buildings used wholly and exclusively in a business. Think of a factory, warehouse, shop or office, often leased to the members' own business.
A house, unit or apartment generally won't meet that test, so it can no longer be bought with borrowed money inside your fund.
What Hasn't Changed
This is a ban on borrowing, not on owning.
Your fund can still buy residential property outright with its own money, provided the purchase meets all the usual rules, including the sole purpose test and your investment strategy.
LRBAs also remain available for business real property and other permitted assets.
If You Already Have a Loan
Existing arrangements are protected. The changes don't apply if your fund:
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entered into an LRBA before 10 August 2026
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maintains or refinances that existing LRBA after 10 August
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exchanged a binding contract to buy real property before 10 August, even if settlement or the loan came later
That last point matters for off-the-plan purchases. If you signed before 10 August, the ATO has confirmed you're covered, even if the property doesn't settle for some time.
A word of caution, though. A straight refinance doesn't create a new arrangement, but the ATO's guidance lists some other changes that do. Get advice before restructuring an existing loan so you don't accidentally lose that protection.
It Applies to Every Lender
The rules don't depend on who lends the money. A bank, a non-bank lender and a related party loan are all treated the same way.
If you were planning to have a family member or related entity lend to the fund for a residential purchase, that option is closed too.
The Rule That Lasts the Life of the Loan
For new arrangements, the property must be business real property when the loan is taken out, and for the entire life of the loan.
If the property stops being used wholly and exclusively in a business while the LRBA is still running, the fund breaches the borrowing rules and compliance action may follow.
That's a long time horizon. Before committing to a new property loan, think carefully about:
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how secure the business use is, especially if the tenant is your own business
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what would happen if the tenant left or the business moved
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whether any part of the property is, or could become, residential
Questions Worth Asking Now
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Does your investment strategy still reflect what your fund can actually do?
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If you were planning a residential purchase, could your fund afford it without borrowing, and still keep enough cash for expenses and pension payments?
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If you're relying on the transitional rules, do you have the paperwork showing your contract or loan date?
Thinking About a Property Purchase?
The changes narrow the options, but SMSFs can still invest in property. The right path depends on your fund's balance, your members' ages and your long-term plans.
If you'd like to talk through how this applies to your fund, reach out to our office.