Property has long been a popular investment choice for some self-managed super funds, particularly where trustees want greater control over how their retirement savings are invested.
For SMSFs that need to borrow to purchase property, however, the rules have now changed.
From 10 August 2026, a new limited recourse borrowing arrangement, or LRBA, involving real property can generally only be used where the property qualifies as business real property. This means new LRBAs can no longer generally be used to purchase residential investment property.
According to Sam Nunn, Financial Adviser & Partner at Halpin Wealth, the change makes it even more important to understand the structure before committing to a property purchase.
“Property within an SMSF can already involve several layers of superannuation, lending and investment rules,” Sam says.
“With the borrowing rules now more restricted, trustees need to understand what they can do before signing a contract or arranging finance.”
What has changed?
SMSFs are generally prohibited from borrowing, although LRBAs have historically provided an exception.
Under an LRBA, an SMSF can borrow to acquire an eligible asset, with the lender’s rights generally limited to that asset if the fund defaults.
Before the recent change, an SMSF could potentially use an LRBA to acquire eligible residential or commercial property.
For new arrangements entered into from 10 August 2026, real property acquired using an LRBA must generally meet the definition of business real property.
This means an SMSF may still be able to borrow to acquire property such as the below, provided the property meets the relevant requirements:
- An office
- A warehouse
- A factory
- A shopfront
- Certain farming properties
- Other qualifying commercial premises
“This is not a complete ban on SMSF borrowing,” Sam says.
“It is a change to the type of real property that can be purchased using a new borrowing arrangement. That distinction is important, particularly for trustees who had been considering residential property.”
An SMSF may also still be able to purchase residential investment property outright using available fund assets, subject to the usual SMSF rules.
What is business real property?
Business real property generally means land and buildings used wholly and exclusively in one or more businesses.
The business using the property does not necessarily need to be operated by the SMSF members.
For example, an office, warehouse or shop leased to a business may qualify.
Some less obvious properties can also potentially meet the definition. Certain farming properties may qualify even where there is a residence on the land, and a residential-style property used wholly for business purposes may also meet the requirements.
“Whether a property qualifies is not always obvious from how it looks,” Sam says.
“What matters is how it is used and whether it satisfies the legal definition, so this is an area where trustees should get specialist advice rather than make assumptions.”
What about residential property?
The rule change does not prevent SMSFs from investing in residential property altogether.
An SMSF may still be able to purchase residential investment property using existing cash or other available fund assets.
However, the usual SMSF investment rules continue to apply.
The property must be held for the purpose of providing retirement benefits to members and generally cannot be used personally by a member or their relatives.
“Sometimes the conversation becomes focused on whether an SMSF is allowed to buy property,” Sam says.
“The more important question is whether the property is actually an appropriate investment for that fund and its members.”
What happens to existing LRBAs?
Trustees with existing residential property borrowing arrangements are not generally required to unwind them because of the new rules.
Arrangements entered into before 10 August 2026 are protected by transitional provisions, and certain existing borrowings may also be refinanced without losing that treatment.
This means trustees should not assume their current arrangement has become invalid.
“Existing trustees should not panic or make changes simply because the rules have changed,” Sam says.
“The first step is to confirm how the transitional provisions apply to the particular arrangement and then consider whether the existing strategy still makes sense.”
Does property still fit the fund’s strategy?
Being permitted to purchase a property does not necessarily mean it is the right investment.
Property can represent a substantial commitment for an SMSF and may result in a large proportion of the fund being concentrated in a single asset.
Trustees should consider issues such as:
- Diversification
- Liquidity
- Loan repayments and interest costs
- Rental income and expenses
- Periods without a tenant
- Member ages and retirement timeframes
- The fund’s ability to pay benefits when required
- Whether the investment remains consistent with the fund’s investment strategy
“If most of an SMSF’s assets are tied up in one property, that can create challenges later when members move into retirement and need greater access to cash,” Sam says.
“The structure needs to work not only on the day the property is purchased, but over the longer term as members’ circumstances change.”
Property through an SMSF can also involve additional establishment, legal, accounting, audit, lending and property management costs.
These need to be weighed against the expected benefits of the investment.
Get the structure right before you commit
For anyone considering property through an SMSF, the recent LRBA changes make early planning particularly important.
Before entering into a contract, trustees should understand:
- Whether the property qualifies under the new rules
- Whether borrowing is required
- Whether the fund has sufficient liquidity
- How the property fits within the investment strategy
- The costs associated with the purchase
- How the investment may affect members as they approach retirement
Advice may need to involve your financial adviser, accountant, SMSF specialist, lawyer and lender.
“An SMSF gives trustees greater control, but it also comes with greater responsibility,” Sam says.
“Before making a significant property investment, we want to understand not only whether the structure is allowed, but whether it genuinely improves the client’s long-term retirement position.”
Source: Adapted from “Understanding the changes to SMSF rules”, published through Advisely on 8 September 2026.
Considering property through your SMSF?
Halpin Wealth can help you consider whether property fits your fund’s investment strategy, cash flow and retirement goals, while working alongside your accountant and other specialists where required.
If you are considering an SMSF property purchase or reviewing an existing arrangement, speak with our team before making any significant decisions.
This information provided in this article is general advice only and has been prepared without taking into account your own objectives, financial situation or needs. Before making a financial decision based on this advice, you must consider whether it is appropriate in light of your own needs, objectives, and financial circumstances, and where relevant, obtain personal financial, taxation or legal advice. Where a financial product has been mentioned, you should obtain and read a copy of the Product Disclosure Statement (PDS) prior to making any decisions about whether to acquire a product.