Self-Managed Super Funds (SMSFs) have commonly invested in property. However, following recent Federal Budget reforms and subsequent legislation, the rules surrounding how an SMSF can buy property have changed.
Buying Outright?
Your SMSF can still purchase any type of property (residential or commercial) outright, providing it has the cash to do so without borrowing.
Buying with a Loan?
The rules have now changed significantly in this case. SMSFs can no longer borrow to purchase residential property. However borrowing to purchase commercial (officially defined as business real property) remains fully allowed.
What changed in the 2026 Rules?
Under the old rules, SMSFs could use a Limited Recourse Borrowing Arrangement (LRBA) to buy property using a mix of super savings and a bank loan.
Following recent legislative changes, the rules now state that any new SMSF borrowing arrangement (LRBA) can only be used to acquire business real property (commercial property such as offices, retail shops, industrial sheds or primary production land used wholly and exclusively in a business).
What about property your SMSF already owns?
If your SMSF already owns a residential property, with an existing mortgage (LRBA) do not panic. This is still allowed
- Existing residential SMSF loans are fully grandfathered meaning they are covered by the old rules.
- You are not required to sell or unwind your current investments.
- You can generally continue to maintain or refinance your existing loan arrangements providing you follow the guidelines.
Feature | Residential Property | Commercial Property |
Can your SMSF buy it outright using cash? | Yes | Yes |
Can your SMSF take out a new loan (LRBA) | No longer allowed | Still allowed |
Existing Loans | Protected (can continue / refinance) | Unaffected (can continue / refinance) |
Key Takeaway
While the rules around SMSF property borrowing have changed, property investment remains an option for SMSFs in the right circumstances.
If you are considering purchasing property through your SMSF or are unsure how the changes affect an existing investment or loan, it is important to seek advice before entering into a contract or making changes to your current arrangements.
Our team can help you understand the rules and determine whether an SMSF property strategy is appropriate for your circumstances.
The Economy has Changed. Has your Business Plan changed with it?Next Article
Xero: What’s New and What’s Coming Next?
