Buying property through an SMSF after the 2026 borrowing ban

For more than a decade, "buy property with your super" meant one thing: a self-managed super fund (SMSF) borrowing to buy a residential investment property. That option closed on 10 August 2026. An SMSF can no longer enter into a new borrowing arrangement to buy residential property — only business real property.

If you've seen advertising about using your super to buy an investment home, read this first. It covers what changed, what's still allowed, and the rules that apply to any property an SMSF owns.

What changed on 10 August 2026

SMSFs are generally banned from borrowing. The main exception is a limited recourse borrowing arrangement (LRBA), where the property is held in a separate trust and the lender can only claim that one asset if the loan goes bad.

A change in the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 narrowed that exception. According to the ATO:

• an LRBA entered into on or after 10 August 2026 to buy real property can only be used to acquire business real property
• the property must be business real property when the LRBA starts, and for the whole life of the loan
• it applies whoever the lender is — a bank, a non-bank lender or a related party

Business real property generally means land and buildings used wholly and exclusively in a business — a shop, office, factory or warehouse, for example. A house or apartment rented out to tenants generally isn't business real property.

If a property financed under an LRBA stops being business real property, the fund has breached the borrowing rules and the ATO may take compliance action.

What isn't affected

• Existing loans. An LRBA already in place before 10 August 2026 for residential property can continue.
• Refinancing an existing loan. The ATO treats a new loan contract for the same asset, with the same or a new lender, as refinancing — and that's still allowed.
• Contracts exchanged before 10 August 2026. If the fund exchanged a binding contract before that date, the change doesn't apply, even if finance or settlement came later.
• Buying with cash. An SMSF can still invest in residential property without borrowing, as long as it meets every other rule.

The rules every SMSF property must meet

Whether it's bought with cash or with a loan, a property owned by an SMSF must follow the superannuation rules. Moneysmart and the ATO summarise them:

• The sole purpose test. The fund exists solely to provide retirement benefits to its members. The property can't give anyone a benefit today.
• No living in it. A member, or anyone related to a member, can't live in a residential property the fund owns.
• No renting it to family. A member or related party can't rent a residential property from the fund.
• No buying it from a related party. An SMSF generally can't acquire residential property from a member or related party. Business real property is an exception, if bought at market value.
• Business premises can be leased to a member's business, at market rent and on proper terms.

"Related parties" is a wide definition. It includes members, their relatives, their business partners, and companies or trusts they control.

Breaking the rules can lead to penalties, the fund being made non-complying, or trustees being disqualified.

How an SMSF property is taxed

Super funds are taxed differently from individuals:

• Rental income and capital gains are taxed within the fund, generally at concessional super tax rates, and investment earnings that support a retirement income stream can be tax-free within limits.
• Complying super funds get a one-third discount on capital gains for assets held at least 12 months.
• Super funds are outside the 2026 negative gearing and CGT reforms. Treasury says the negative gearing change excludes superannuation funds, including SMSFs, and the new CGT method applies to individuals, partnerships and trusts.

The costs to weigh

Moneysmart lists the costs of holding property in an SMSF, and most come out of your retirement savings:

• advice fees, upfront or ongoing
• set-up costs, including legal fees, SMSF establishment and stamp duty
• ongoing fund costs: accounting, audit, and ASIC and ATO fees
• property costs: rates, management, maintenance and insurance
• for a business property bought with an LRBA, interest and loan fees — SMSF loans often cost more than ordinary loans — and a separate holding trust

The risks

• Concentration. One property can make up most of a fund's value. Your retirement savings are then tied to one asset, in one location.
• Liquidity. Property can't be sold in pieces. If the fund needs cash to pay a pension or a death benefit, it may have to sell at a bad time.
• Cash flow. The fund has to cover vacancies, repairs and any loan repayments from contributions and income.
• Hard to unwind. Mistakes in how the arrangement is set up can be expensive to fix.

Get advice from the right person

Advice to set up an SMSF, or to move super into one to buy property, is financial product advice. Whoever gives it must hold an Australian financial services licence or be authorised by a licensee. You can check any adviser on ASIC's Financial Advisers Register.

Moneysmart also warns that referral fees and commissions can pass between property developers, agents and advisers. Ask anyone who recommends an SMSF property strategy how they're paid, and by whom — including any specialist you're introduced to.

If you want property exposure through super

Without borrowing for residential property, the realistic options are narrower:

• an SMSF buying residential property outright with cash, which requires a large balance
• an SMSF buying business real property, with or without an LRBA — for example, premises leased to a business at market rent
• property funds or listed property trusts held inside super, which offer property exposure without owning a single building

Which, if any, suits you depends on your balance, age, other assets and retirement plans — so talk to a licensed financial adviser before you act.