Question 1

What changed for SMSF borrowing on 10 August 2026?

Accepted Answer

Any Limited Recourse Borrowing Arrangement (LRBA) entered into on or after 10 August 2026 to buy real property can only be used to acquire business real property. In plain terms: an SMSF can no longer borrow to buy a residential investment property. Nothing else about LRBAs changed. The mechanics (bare trust, single acquirable asset, limited recourse) are the same, and the other exceptions to the borrowing prohibition are untouched. The restriction applies to every lender, bank, non-bank or related party.

Question 2

Does this affect the SMSF loan I already have?

Accepted Answer

No. If your fund entered into an LRBA to finance real property before 10 August 2026, you can keep maintaining it, and you can refinance it (a new loan contract for the same asset, with the same or a new lender) without the property needing to be business real property. There is also transitional relief if the fund exchanged a binding contract to acquire the property before 10 August 2026, even if finance and settlement happen afterwards.

Question 3

Is SMSF property dead now?

Accepted Answer

No. What's gone is one funding method for one asset class: geared residential. Still available: buying residential or any other property outright with fund cash, borrowing to buy business real property (including your own business premises, leased back at market rent), commercial and industrial assets, unlisted property trusts and syndicates that hold property without the fund itself borrowing, plus the usual listed and unlisted investments. For most of our SMSF clients the change shifts the conversation from leverage to liquidity: build the fund balance, buy unencumbered, or use business real property where borrowing genuinely fits.

Question 4

What counts as business real property?

Accepted Answer

Land and buildings used wholly and exclusively in one or more businesses. It must be business real property at the moment the LRBA is entered into, and it must stay business real property for the entire life of the loan, if it stops, the fund has breached the borrowing rules. Primary production land can qualify even with a dwelling on it, provided the dwelling sits on no more than 2 hectares and the main use of the whole property isn't domestic. See ATO ruling SMSFR 2009/1 for the detail.

Question 5

How do I get my fund to a cash purchase faster?

Accepted Answer

Residential now has to be bought unencumbered, so the whole game is getting money into the fund. The levers, in the order they usually matter: consolidate other super into the SMSF; use carry-forward concessional contributions (unused cap from the previous five years, if your total super balance was under $500,000 at the previous 30 June); use the bring-forward rule to make up to three years of non-concessional contributions in one year; make downsizer contributions of up to $300,000 each from age 55 if you sell a qualifying home; and consider adding members, an SMSF can have up to six. Keep a liquidity buffer. A fund that spends its entire balance on one house still has to pay the audit, the insurance and any pension minimums, and it can't sell a bedroom to do it.

Question 6

Can my SMSF and I own a property together as tenants in common?

Accepted Answer

Yes, and it's one of the cleaner ways to keep leverage in the picture. The fund buys its share outright, say 40%, and you buy the rest in your own name with a normal investment loan. The leverage sits outside super where borrowing is still allowed. The conditions are strict: the fund's share must stay completely unencumbered (no mortgage, charge or guarantee over it for your personal loan), the price must be supported by a valuation, and rent and expenses must be split strictly by ownership share under a written co-ownership agreement. It is still residential property, so no member or relative can ever live in it or rent it. Plan the exit up front, selling a part-share of a house is harder than selling a house.

Question 7

Can two unrelated SMSFs buy residential through a trust that borrows?

Accepted Answer

In a narrow form, yes. The borrowing prohibition applies to the fund, not to every entity the fund invests in. If a unit trust is genuinely not a related party of your SMSF, the units are not in-house assets and the trust itself can borrow. That is different from the fund borrowing. It only works if the trust is genuinely unrelated, and 'unrelated' is a technical test, not a feeling. Non-arm's-length income rules also apply, so the trust's income and terms must be commercial. In practice the borrowing sits with the co-investor's capacity, not the fund's, so this is co-investment rather than a replacement for the old LRBA. It needs a purpose-drafted deed and independent SMSF legal advice for each fund. If the co-investor is related to you, the alternative is a non-geared unit trust under SIS Regulation 13.22C. That trust can hold residential property and the fund can buy units progressively, but the trust can never borrow, and a single breach makes the units in-house assets permanently.

Question 8

What is the 50% control test, and why does exactly 50/50 matter?

Accepted Answer

Section 70E of the SIS Act treats a trust as controlled by you if you and your associates have a fixed entitlement to more than 50% of its income or capital, or if the trustee acts in accordance with your directions. Exactly 50/50 between two genuinely unrelated funds falls short of the first limb, which is why people reach for it. The trap is the second limb: it's behavioural. If both parties jointly direct the trustee, if the deed gives each side a veto that lets you act together, or if the other party is a relative, employer, business partner or other Part 8 associate, the trust is related and the fund's whole investment counts against the 5% in-house asset cap. Deadlock mechanics, genuinely independent decision-making and a deed drafted for the purpose are what separate a structure from a breach, and none of that can be assessed without looking at your specific facts.

Question 9

Can I buy property through my SMSF?

Accepted Answer

Yes. A self-managed super fund can buy direct residential or commercial property as part of its investment strategy, provided the purchase satisfies the sole purpose test (the investment must be for the sole purpose of providing retirement benefits to members) and complies with the Superannuation Industry (Supervision) Act 1993 (SIS Act). What changed on 10 August 2026 is funding, not ownership: residential property must now be bought outright with fund money, while borrowing under an LRBA is limited to business real property.

Question 10

What's the minimum SMSF balance to buy property, myth vs reality?

Accepted Answer

There's no legal minimum balance, but there's a practical one, and it went up. Since a new LRBA can't fund residential property, a residential purchase now needs the full price plus stamp duty, legal costs and a liquidity buffer sitting in the fund. For business real property bought under an LRBA, expect roughly 30 to 35% of the price in cash for deposit, duty and buffer. ASIC guidance suggests at least $200k for an SMSF to be cost-effective, though this isn't a legal threshold.

Question 11

Residential vs commercial property in SMSF, what's different?

Accepted Answer

Residential: cannot be lived in or rented to a member or related party, must be acquired from an unrelated party, and from 10 August 2026 cannot be funded by a new LRBA, so it has to be bought unencumbered. Lower yields but stable tenant demand. Commercial (technically 'business real property'): can be acquired from a related party at market value, can be leased to a related party such as your own business at market rent, and is the only real property a new LRBA can fund. Generally higher yields but longer vacancy risk.

Question 12

What is a Limited Recourse Borrowing Arrangement (LRBA)?

Accepted Answer

An LRBA is the only way an SMSF can borrow to buy property, and since 10 August 2026 the property has to be business real property. The asset is held in a separate 'bare trust' (also called a custodian trust or holding trust) until the loan is paid off, at which point legal title transfers to the SMSF. The 'limited recourse' part means if the SMSF defaults, the lender can only claim against that specific asset, not the fund's other assets.

Question 13

Why are SMSF loans harder to get and more expensive?

Accepted Answer

The major banks left SMSF lending years ago, and the residential LRBA ban has narrowed the remaining market to commercial and business real property lending. Expect second-tier and non-bank lenders, rates well above standard investment loans, deposits of 30% or more on commercial security, shorter loan terms and stricter serviceability including a liquidity buffer. The fund must also show enough ongoing contributions and rent to service the loan.

Question 14

What is the 'single acquirable asset' rule and why does it matter?

Accepted Answer

Under LRBA rules, the borrowing can only be used to acquire one 'single acquirable asset'. This restricts what you can do, for example, you generally cannot use SMSF borrowing to substantially improve or develop the property, because that creates a different asset. Repairs and maintenance are fine; subdivisions, knock-down rebuilds and major value-adding renovations are not allowed while the LRBA is in place.

Question 15

What if the business tenant leaves and the property stops being business real property?

Accepted Answer

This is the live risk in the new rules. The asset must stay wholly and exclusively used in a business for the entire life of the LRBA. If it stops, for example the premises sit vacant on a long-term basis or get converted to residential use, the fund has failed to maintain the borrowing properly and compliance action can follow. Vacancy planning and lease continuity now matter as much as the yield.

Question 16

Can I renovate or develop an SMSF property?

Accepted Answer

Repairs and maintenance: yes, anytime. Improvements: only if the property is held outright with no LRBA, and they cannot fundamentally change the character of the asset. Major redevelopment, subdivision or knock-down rebuilds while subject to an LRBA breach the single-acquirable-asset rule. Once the LRBA is paid off, more flexibility opens up.

Question 17

Can I buy a property from myself or a relative through my SMSF?

Accepted Answer

Generally no for residential. The SIS Act prohibits acquiring residential property from a related party (members, relatives, related entities). Commercial property used wholly and exclusively in a business ('business real property') is the exception, you can acquire it from a related party at market value, and lease it back at market rent.

Question 18

Can I live in my SMSF property or rent it to family?

Accepted Answer

Absolutely not for residential. Members, relatives and related parties cannot occupy or rent residential property held in an SMSF, at any time, even at market rent. Doing so breaches the in-house asset rules and the sole purpose test, and can result in the fund being declared non-compliant (taxed at 45% on all assets and income). For commercial business real property, leasing to a related-party business at market rent is allowed.

Question 19

What are the most common SMSF audit failures?

Accepted Answer

Late or missing market valuations, related-party loans not on commercial terms, inadequate documentation of the investment strategy, in-house asset rule breaches, contributions in excess of caps, insufficient liquidity to pay benefits, missing trustee declarations, and improper use of LRBA proceeds. SMSFs must be audited annually by an approved SMSF auditor.

Question 20

What are the true setup and ongoing costs of an SMSF?

Accepted Answer

Setup: SMSF establishment with corporate trustee typically $1,500–$3,000. Bare trust for LRBA: $1,500–$3,000. Legal review and lender requirements add more. Ongoing: annual ASIC fees (~$60), annual independent audit ($500–$1,000), tax return preparation ($1,000–$3,000), investment strategy review, actuarial certificates if in pension phase, and trustee duties. Total ongoing typically $2,500–$5,000 p.a. for a property-only SMSF.

Question 21

How is SMSF property income taxed?

Accepted Answer

In accumulation phase: rental income and capital gains taxed at 15% (capital gains held over 12 months get a 1/3 discount, effectively 10%). In pension phase (drawing a retirement income stream): generally 0% on both income and capital gains attributable to the pension. This makes SMSFs particularly powerful for properties held into retirement.

Question 22

What happens to my SMSF property at retirement?

Accepted Answer

Several options: (a) keep the property and start a pension, rental income and any capital gains are then tax-free in pension phase; (b) sell the property, capital gains taxed at 0% if in pension phase, 10–15% otherwise; (c) transfer the property in-specie out of the fund (only allowed in limited circumstances and triggers stamp duty in some states). Planning the exit at the buy stage matters, illiquid assets can complicate pension drawdowns.

Buyingpropertythroughyourself-managedsuperfund.

Law change: 10 August 2026

Residential property after the change

SMSF basics

LRBA & borrowing (business real property only)

Compliance & related-party rules

Costs, tax & retirement

SMSF Property After the 2026 Lending Change

Property Investor Tax Deduction Checklist

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