Most people running a self-managed superannuation fund (SMSF) reach a point where the fund’s balance and the asset they want are not the same number. Borrowing is the only lever that closes that gap, and superannuation law has always been reluctant to hand it over. As a general rule, SMSF trustees cannot borrow at all. The exception is a limited recourse borrowing arrangement (LRBA). On 10 August 2026, the rules about what an LRBA can be used to buy changed. If you are thinking about buying property in your SMSF, the first question is now what kind of property.
Your fund can still borrow to buy business premises, but it can no longer borrow to buy a new residential investment property. In our view, that makes buying property in your SMSF a legal question before it is a financial one. Whether the property qualifies, who your fund buys it from and how it is used afterwards are all governed by rules. Those rules are easy to get wrong, and correcting an incorrectly structured purchase can be difficult and expensive. Which is why the structure should be checked before you sign a contract, not after.
What has changed for buying property in your SMSF
Since 10 August 2026, a new LRBA over real property can only be used to acquire business real property. Your fund can no longer enter a new LRBA to buy an ordinary residential investment property. That includes a house or apartment rented to residential tenants.
The restriction is on the borrowing rather than on the ownership. Your fund can still buy residential property with its own money, subject to the usual superannuation rules. What has changed is your fund’s ability to use debt to reach an asset larger than its own balance.
The 2026 changes are prospective, so an existing residential LRBA does not have to be unwound simply because the new rules have arrived. There are also transitional provisions protecting certain arrangements entered into before the new rules commenced, and the legislation provides protection for the refinancing of certain existing borrowings. That protection has edges. Changing an existing loan, increasing the amount borrowed or substantially restructuring the arrangement may take you outside it. If you are considering a refinance, get advice on the new arrangement before you commit to it.
Business premises are now one of the most important uses for SMSF borrowing
Business real property is typically commercial premises, such as offices, warehouses, factories, shops and consulting rooms. But a property doesn’t qualify because of what it looks like. It has to meet a legal test, which turns on whether the property is used wholly and exclusively in a business. Whether a particular property passes is assessed case by case, a property can pass in one owner’s hands and fail in another’s.
For many business owners, the most useful option left is the premises their own business operates from. Say you run a manufacturing business that rents its factory from an unrelated landlord. Your fund may be able to buy a factory and lease it to your business. That depends on the property qualifying and the arrangement complying with the superannuation rules. Over the life of the loan, the rent your business pays goes to your own fund rather than to a third party.
Dealings between your fund and a business you are connected with are held to a stricter standard than dealings with a stranger. The acquisition, the lease and everything that follows generally need to comply with the applicable related-party and arm’s-length requirements. Our guide to SMSF investment rules sets out the wider framework.
Is your fund weighing up a property purchase, or do you want to know where an existing property stands under the new rules? Call us on 1300 654 590 or email wehelp@adlvlaw.com.au before you commit.
Owning property in your SMSF is heavily regulated
Buying the property is only the first decision the rules reach. Property owned by an SMSF remains subject to a lot of regulation and compliance for as long as the fund holds it.
Renovations are a common example. Whether your fund can use its money to renovate or improve a property it owns will depend on the type of works proposed and whether they are compliant. The same care applies when the property eventually passes on, which we discuss in business succession and your super fund.
None of this makes property a poor investment for an SMSF. It just means each step needs to be tested against the rules before it is taken. Correcting a mistake after the event can be difficult and expensive.
How we can help
We advise SMSF trustees on owning property in their fund, whether the fund already holds it or is making a new purchase. That includes purchases where the fund needs to borrow or deal with a related business. We work alongside your accountant and financial adviser, so the legal structure matches the strategy you have set together.
If you’d like to talk through your specific situation, call us on 1300 654 590 or email wehelp@adlvlaw.com.au for an obligation-free discussion. We’ll connect you with a great lawyer who can guide you to the right solution.
The information contained in this post is current at the date of publishing – 15 October 2026