Understanding the changes to SMSF rules
Written and accurate as at: Sep 08, 2026 Current Stats & Facts
For years, limited recourse borrowing arrangements, or LRBAs, have given SMSF trustees a way to borrow money to buy property through their fund. That option has now narrowed considerably.
Changes passed by Parliament in June 2026 mean that, from 10 August 2026, a new LRBA involving real property can only be used to acquire property that qualifies as business real property. Here’s what the change means in practice.
Is it a ban on LRBAs?
No. LRBAs themselves remain part of the SMSF landscape; what’s changing is the type of real property an SMSF can acquire using a new LRBA.
Before 10 August, an SMSF could potentially use an LRBA to borrow for an eligible residential or commercial property, provided the arrangement met the existing superannuation rules. This allowed the SMSF to invest in an asset that would have otherwise been beyond the fund’s available resources.
From 10 August, however, a new LRBA cannot be used to acquire residential real property.
Business real property can still qualify, meaning an SMSF may be able to borrow to purchase an office, warehouse, shop or other commercial premises, provided the property meets the relevant requirements.
And SMSFs can still buy residential property outright using existing cash, subject to the usual investment rules.
For example, trustees will need to ensure the property is acquired and maintained solely for the purpose of providing retirement benefits, and that it complies with rules around personal use and related-party arrangements. In other words, an SMSF generally can’t buy a residential property for a member or their family to live in or use.
What is business real property?
Business real property generally means land and buildings used wholly and exclusively in one or more businesses.
The business does not necessarily have to be operated by the SMSF or the property owner. A warehouse leased to a business, for example, can qualify. So can an office, factory or shopfront that’s used for commercial purposes.
There are, however, some less obvious cases. Certain farming properties can qualify even where a dwelling is present, provided the property meets the specific requirements around its use and size (typically, the residence and grounds cannot be more than 2 hectares).
And it’s possible for residential-style properties to be classified as business real property if they’re used entirely for business purposes. For example, a house that has been converted into commercial premises and is used solely for operating a business may meet the definition, despite its outward appearance.
Who does it apply to? And what about existing LRBAs?
The change is obviously relevant to SMSF trustees who were considering borrowing to buy residential property.
But for those whose SMSFs already have an LRBA in place, the new rules won’t require you to unwind it.
Existing arrangements are protected, meaning an LRBA entered into before 10 August can continue to fund the acquisition of a residential property, even if settlement occurs after that date. An existing LRBA can also be refinanced without losing its existing treatment under the rules, assuming the lender’s eligibility criteria are met.
What to be aware of
If you’re considering investing in property through an SMSF, the question now is how the purchase will be funded. Borrowing to buy residential real property is no longer available through a new LRBA. but for business real property, the usual SMSF rules still apply.
These changes make professional advice particularly important. Before signing a contract or restructuring an existing loan, have an SMSF specialist check the property, the proposed borrowing arrangement and the relevant dates. When it comes to SMSFs and property, a seemingly small structural detail can have consequences well beyond the transaction itself.
