Updated July 2026: this guide has been updated to cover a law change that was enacted after this page was first drafted. The description below is accurate as at July 2026 — check the “what’s changing” section for exact commencement timing.

Is SMSF property borrowing ending in 2026 or 2027?

No. Self-managed super funds (SMSFs) can still borrow to buy property, and the borrowing mechanism itself — a limited recourse borrowing arrangement, or LRBA — isn’t being abolished. What’s changing is narrower and more specific: from 10 August 2026, a new SMSF LRBA used to buy real property will only be allowed if that property is “business real property”, not an ordinary residential investment property. As at July 2026, this change is enacted law but hasn’t started yet — it commences on 10 August 2026.

Existing SMSF property loans aren’t affected. If your fund already has an LRBA in place over a residential investment property, or refinances that existing borrowing, the change doesn’t touch it.

Superannuation rules are complex and penalties for breaches are significant — seek advice from a licensed financial adviser before making SMSF decisions.

What’s actually changing, and from when?

The change comes from Schedule 5 of the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Act No. 49 of 2026), which received Royal Assent on 26 June 2026. Schedule 5 commences “the 45th day after this Act receives the Royal Assent” — 10 August 2026, under the Act’s own commencement table.

Schedule 5 adds one new paragraph to section 67A(2) of the Superannuation Industry (Supervision) Act 1993 (the SIS Act), which defines what a fund is allowed to borrow to buy under an LRBA. From commencement, it reads: an asset qualifies only if, “for an asset that is real property — the asset is business real property (within the meaning of section 66 of this Act).”

That’s the whole change. It doesn’t touch LRBAs over other asset types (like a single class of identical listed shares), and it doesn’t reduce the LRBA exception in any other way — it narrows what real property a new LRBA can be used to buy.

Before 10 August 2026	From 10 August 2026
New LRBA can buy an ordinary residential investment property	New LRBA over real property must be “business real property” — an ordinary residential rental doesn’t qualify
New LRBA can buy business real property	Unchanged — still allowed
New LRBA can buy other eligible assets (e.g. a single class of identical shares)	Unchanged — still allowed
Existing residential-property LRBA already in place	Unchanged — continues; refinancing the same borrowing is also unaffected

Table note: this compares only what a new arrangement is allowed to acquire — it isn’t a ranking of which structure is “better”, and it says nothing about any individual fund’s situation.

What is an SMSF limited recourse borrowing arrangement (LRBA)?

Super funds are generally banned from borrowing at all — section 67 of the SIS Act sets that out. Section 67A is the exception that makes property (and certain other) borrowing possible for an SMSF, subject to strict conditions.

Under an LRBA, the fund borrows money to buy a single “acquirable asset”, which is held on trust for the fund (the standard bare-trust or holding-trust structure) until the loan is paid off, at which point the trustee can take legal ownership. The “limited recourse” part matters: if the loan defaults, the lender’s rights — and any other party’s rights, including a guarantor’s — are limited to the asset itself. The fund’s other assets can’t be pursued to cover the shortfall.

Meeting the LRBA borrowing rules doesn’t excuse a fund from its other obligations. In particular, the sole purpose test in section 62 of the SIS Act still applies on top: an SMSF must be maintained solely to provide retirement (or death) benefits to members, and an LRBA that lets a member or related party get more than an incidental personal benefit — for example, a trustee or relative living in or holidaying at the fund’s LRBA property — can breach that test even where the borrowing itself is structured correctly. A breach can cost the fund its tax concessions and expose trustees to compliance penalties.

What is “business real property”, and why does it matter now?

Business real property, under section 66 of the SIS Act, is broadly land and buildings used wholly and exclusively in a business. An ordinary residential rental property — a house or unit let out to tenants in the usual way — isn’t business real property under this definition.

That’s exactly why the change matters for property investors thinking about an SMSF strategy: it’s a real-property-specific test that separates commercial-style holdings (say, a fund buying the premises its members’ business operates from) from a standard residential investment property. Whether a specific property meets the business-real-property test can turn on fine detail — how the property is used, by whom, and under what arrangement — so it’s a fund-by-fund question for a licensed adviser, not something a general guide can determine for any particular property.

Do existing SMSF property loans need to be repaid or unwound?

No. The Act’s own transitional wording confirms the change “applies in relation to arrangements entered into on or after the commencement of this Schedule” — 10 August 2026. Three things stay covered by the existing section 67A exception regardless of the change:

• a borrowing arrangement entered into before 10 August 2026;
• refinancing of that existing borrowing; and
• an acquisition happening under an arrangement entered into before that date.

So a fund with a residential-property LRBA already running keeps running it. Nothing forces an early sale, an early repayment, or a restructure because of this change alone.

Wasn’t there already a push to ban SMSF borrowing altogether?

There was — but it’s a different, older proposal, and it went nowhere. The 2014 Financial System Inquiry (the Murray Inquiry) recommended, as Recommendation 8, removing the LRBA exception entirely for all superannuation funds, not just SMSFs.

The Government’s own 2015 response rejected that recommendation outright: “The Government does not agree with the Inquiry’s recommendation to prohibit limited recourse borrowing arrangements by superannuation funds. While the Government notes that there are anecdotal concerns about limited recourse borrowing arrangements, at this time the Government does not consider the data sufficient to justify significant policy intervention.”

That 2015 rejection stands separately from the narrow 2026 change above. No proposal to end SMSF LRBA borrowing altogether has been enacted, and none was found to be currently before Parliament as at July 2026. It’s worth keeping the two apart: “banned entirely” (2014 proposal, rejected in 2015) and “new residential-property LRBAs narrowed to business real property” (enacted 2026, in force from 10 August) are not the same thing.

(Separately, the same Act that carries this LRBA change also enacts unrelated negative-gearing and capital gains tax changes taking effect from 1 July 2027, in a different schedule — worth knowing they sit in the same piece of legislation, but they’re a distinct topic from the borrowing change covered here.)

What should SMSF trustees weigh before entering a new LRBA?

None of this is a recommendation to borrow, not to borrow, or to choose one asset over another — that call sits with a fund’s trustees and their licensed adviser. But the factors an SMSF’s investment strategy already has to address, under Superannuation Industry (Supervision) Regulation 4.09, are a useful checklist before any property-borrowing decision:

• Risk and likely return — weighed to maximise member returns, not a single member’s preference.
• Diversification — how a large, geared property holding sits alongside the fund’s other assets.
• Liquidity — how easily fund assets convert to cash to pay benefits and expenses. This is often the sharpest tension with a geared property: real estate is illiquid, and a fund still has to be able to pay member benefits and running costs as they fall due.
• Insurance — whether the fund holds appropriate cover for its members.
• Member circumstances — age, employment status and retirement needs.

Two further obligations sit alongside the investment strategy for any fund holding property (LRBA or otherwise): assets must be valued each year at market value using an objective, supportable process — for property, that typically means an independent valuation or recent comparable sales evidence — and the fund must be audited annually by an ASIC-registered SMSF auditor. If a related party is involved anywhere in the arrangement (as lender, tenant, or otherwise), the SMSF in-house asset rules also come into play, capping in-house assets at 5% of the fund’s total assets — a separate check worth raising with an adviser before any related-party element is added to a property strategy.

Superannuation rules are complex and penalties for breaches are significant — seek advice from a licensed financial adviser before making SMSF decisions.

For SMSF trustees weighing up how much of a fund’s capital to commit to property gearing versus other structures, it’s worth knowing the options aren’t limited to “borrow to buy a whole property” or “don’t invest in property at all”. MyBrix’s Product Disclosure Statement names self-managed super funds among the investor types who can hold Brix — fractional interests in residential property, bought outright with the fund’s own capital rather than through a fund borrowing arrangement, so the LRBA change above has no bearing on that route. Whether a fractional holding suits a particular fund’s investment strategy and sole-purpose obligations is a decision for the trustees and their adviser, not something this guide can determine.

Where can you check this yourself?

The primary sources behind this guide are public and worth reading directly if you want the exact wording:

• Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Act No. 49 of 2026) — Schedule 5 and the commencement table.
• Superannuation Industry (Supervision) Act 1993 — sections 62, 66, 67 and 67A.
• ATO, SMSF investment restrictions and create your SMSF investment strategy.
• Treasury, 2015 Government response to the Financial System Inquiry (Recommendation 8, on LRBAs).

If you’re new to how property investment works as an asset class more broadly — rental income, capital growth, and the costs and risks involved — our guide to property investment in Australia covers the basics before you weigh a specific structure like an SMSF LRBA.

Superannuation rules, and the LRBA rules in particular, sit at the intersection of super law and property law. Nothing here is a substitute for advice from a licensed financial adviser and, where tax consequences are in play, a registered tax agent, applied to your fund’s specific circumstances.