Hello Chasers,
The Federal Government’s changes to Self-Managed Super Fund (SMSF) borrowing rules are now law, introducing significant changes for trustees considering purchasing residential property through their SMSF.
While SMSFs can still invest in residential property, the new legislation restricts the use of Limited Recourse Borrowing Arrangements (LRBAs) to acquire residential investment properties after the commencement date.
If you already have an SMSF property loan—or are planning to purchase property through your fund—it’s important to understand what these changes mean for you.
What Has Changed?
The new legislation changes the conditions under which an SMSF can borrow to acquire real property.
From 10 August 2026, SMSFs will generally no longer be able to use a new LRBA to purchase residential investment property.
However, borrowing through an LRBA will still be permitted where the property qualifies as business real property, provided the arrangement complies with the existing requirements under the Superannuation Industry (Supervision) Act (SIS Act) and official guidelines outlined by the Australian Taxation Office (ATO).
Importantly, this is not a ban on SMSFs owning residential property. Rather, it changes how residential property can be financed within an SMSF.
When Do the New Rules Apply?
The legislation received Royal Assent on 26 June 2026, making the changes law.
The borrowing restrictions officially commence on 10 August 2026, which is 45 days after Royal Assent.
From this date:
- New LRBAs generally cannot be used to acquire residential investment properties.
- Existing arrangements may continue under transitional provisions.
- Borrowing for eligible business real property remains available.
What Happens to Existing SMSF Property Loans?
The good news for existing trustees is that current residential property LRBAs are grandfathered.
As highlighted in compliance updates by the peak industry body, the SMSF Association, if your SMSF entered into a qualifying borrowing arrangement before 10 August 2026, the new legislation generally does not require the loan to be unwound.
However, trustees should continue ensuring the arrangement remains compliant by:
- Maintaining the limited recourse nature of the loan.
- Keeping the bare trust structure correctly established.
- Ensuring loan repayments are made in accordance with the agreement.
- Maintaining arm’s length terms for related-party loans.
- Regularly reviewing the fund’s investment strategy.
What If You’ve Already Signed a Purchase Contract?
The legislation also includes important transitional arrangements.
Where an SMSF entered into a purchase contract before 10 August 2026, the transaction may still be protected, even if settlement occurs after the commencement date.
This may be particularly relevant for:
- Off-the-plan purchases
- Longer settlement contracts
- Delayed property transactions
Trustees should retain documentation showing when contracts were signed and seek professional advice before relying on the transitional provisions.
Can Existing LRBAs Be Refinanced?
Yes.
The legislation protects the refinancing of eligible residential property LRBAs that were entered into before the commencement date.
This means trustees with existing qualifying arrangements may still be able to refinance without losing their grandfathered status, provided the refinancing relates to the original borrowing arrangement.
What Should SMSF Trustees Do Now?
If you currently have an SMSF property loan—or are considering purchasing property through your SMSF—now is the time to review your strategy.
You should consider:
- Whether your existing borrowing arrangement remains compliant.
- Whether a planned property purchase falls within the transitional rules.
- How the new legislation may affect your future investment plans.
- Whether your SMSF investment strategy should be updated.
Obtaining professional advice before entering into any borrowing arrangement can help ensure your fund remains compliant while supporting your long-term retirement objectives.
How Ceebeks Can Help
SMSF legislation continues to evolve, and borrowing rules are becoming increasingly complex.
At Ceebeks Business Solutions for GOOD, we help SMSF trustees understand legislative changes, review existing borrowing arrangements, and develop investment strategies that align with their retirement goals.
If you’re unsure how these new rules may affect your SMSF, we’re here to help.
