SMSF property loans in 2026: what the LRBA changes mean for trustees

As at July 2026, SMSF borrowing rules have changed in a way that matters to any trustee thinking about property. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026, and from 10 August 2026 — 45 days after assent — self-managed super funds can generally no longer enter new limited recourse borrowing arrangements (LRBAs) to acquire residential property. That is a genuine turning point for SMSF lending, but it is also narrower than some of the coverage suggests. This article explains what has changed, what has not, and what it means in practice for trustees. It is general information only — not financial, legal or tax advice — and rules can change, so confirm the current position with the ATO and a licensed financial adviser before acting on any of it.

What changed in June 2026

Superannuation law generally prohibits SMSFs from borrowing. The limited recourse borrowing arrangement is the legislated exception: the fund borrows to help buy a single acquirable asset, the asset is held in a separate holding trust (often called a bare trust) until the loan is repaid, and the lender's recourse is limited to that one asset. Our [SMSF loan guide](/articles/smsf-loans/smsf-loan-guide) walks through the structure in detail.

The new Act closes that exception for one asset class. From 10 August 2026, an SMSF generally cannot enter a new LRBA to acquire residential property. The change targets the borrowing, not the asset: it is the combination of a new loan and a residential purchase that is banned. The legislation is only weeks old as at July 2026, and fine-grained questions — such as how arrangements already in progress at the commencement date are treated — are matters for specific legal advice and for official guidance from the ATO, not for a general article.

What is not changing

For all the attention the ban has received, the list of things it does not touch is longer:

• Existing residential LRBAs are grandfathered. A fund that already holds residential property under a compliant LRBA can generally continue the arrangement and keep repaying the loan as before
• Commercial property LRBAs are untouched. Funds can still borrow to acquire commercial property, including business premises, under the same rules as before
• Cash purchases remain permitted. An SMSF with sufficient capital can still buy residential property outright, subject to the usual rules — the sole purpose test, the related-party restrictions, and a documented investment strategy that supports the purchase
• The standing LRBA rules have not changed. For commercial and grandfathered arrangements, section 67A of the SIS Act still requires a single acquirable asset held in a separate holding trust, still limits the lender's recourse to that asset, still allows borrowed money to fund the purchase plus repairs and maintenance but not improvements, and still prevents the asset being replaced by a different one except in limited circumstances

If you were planning a residential purchase

The window between now and 10 August 2026 is short, and that is precisely why caution matters more than speed. [Moneysmart](https://moneysmart.gov.au/property-investment/smsfs-and-property) has long warned about property spruikers and one-stop-shop operators pressuring people into SMSF property purchases, and a legislated deadline is exactly the kind of urgency that pressure selling feeds on. A property purchase inside super carries decades of consequences; rushing one through to beat a commencement date is rarely how good retirement outcomes are made.

If borrowing for residential property was part of your fund's plan, the realistic paths from here are worth discussing with your adviser:

• A cash purchase, if the fund has genuine scale and would still hold adequate liquid assets afterwards
• Commercial property instead, where borrowing remains available — most naturally for business owners considering their own premises
• A different strategy altogether. Borrowed residential property was never compulsory, and for many funds diversified, liquid investments were always the better fit

What the deadline should not produce is a hurried purchase of a property the fund would not otherwise have chosen.

How commercial SMSF lending continues to work

For business owners in particular, the commercial pathway continues as before. A commercial property that qualifies as business real property — premises used wholly and exclusively in a business — can generally be acquired from a related party and leased back to a member's business, provided everything runs on arm's-length terms at market rent. Residential property enjoys no such exception: members and related parties cannot live in or rent the fund's residential property at any price.

On the finance side, expect SMSF commercial lending to remain a specialist market:

• Larger deposits. SMSF loans commonly require deposits of roughly 20-40%, depending on the asset type and the lender
• Liquidity after settlement. Lenders generally want evidence the fund retains liquid assets after the purchase — not one property and an empty bank account
• A smaller lender panel. Several major banks have exited SMSF lending, and the lenders that remain apply conservative, specialist settings
• Personal guarantees. Most lenders require guarantees from members, and recourse to a guarantor sits outside the limited recourse to the property — a point that deserves professional advice before anyone signs

Our [SMSF loans page](/loans/smsf-loans) and [commercial loans page](/loans/commercial-loans) explain how we help on the finance side, and our [commercial property guide](/articles/commercial-finance/commercial-property-loans) covers how lenders assess the security itself.

Questions to ask before committing

Whether the plan is a commercial borrowing or a residential cash purchase, the questions that matter have not changed:

• Does the fund's documented investment strategy genuinely support this purchase, including its effect on diversification and liquidity?
• Could the fund keep paying the loan through a vacancy, a rate rise, or a period of reduced contributions?
• How would the fund pay a death benefit or a pension if most of its value sits in one property?
• What would unwinding the structure cost if circumstances change? These arrangements are hard and expensive to exit
• Who benefits from the advice you are receiving — and is the person recommending the property also selling it?

That last question matters. Moneysmart specifically cautions against one-stop shops where the advice, the property and the loan all come from related businesses.

Who to consult before deciding

Treat professional advice as a requirement, not an option. A licensed financial adviser should confirm the strategy suits your retirement position — including whether property inside super fits at all. An accountant or SMSF specialist should handle the structure, compliance and audit settings. A solicitor should manage the holding trust documentation and the contract in the correct names and sequence. The [ATO](https://www.ato.gov.au) publishes trustee guidance and will be the authoritative source on how the new law applies, and Moneysmart sets out the risks in plain language. Nothing on this page is personal advice; it is general information current as at July 2026, and the details can change.

Talk it through with a broker

If the change has left your fund's plans uncertain, we can explain what lenders are doing in response, which commercial options remain open, and what deposits and liquidity the active lenders expect. [Get in touch](/contact) and we will walk through the finance side with you. Remember that any SMSF decision also needs licensed financial advice — a broker arranges the loan; your adviser confirms the strategy.