Yes, your SMSF can still buy property, including residential property. What has changed is the ability to use new borrowing arrangements for residential property. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026, starting a 45-day transition period. From 10 August 2026, SMSFs will no longer be able to enter into new Limited Recourse Borrowing Arrangements (LRBAs) to acquire residential property. The core SMSF property compliance rules still apply: the property must meet the sole purpose test, must generally not be acquired from a related party, and must not be lived in or rented by a fund member or related party. The borrowing side is where the ground has genuinely shifted.
The Rules That Haven’t Changed
Before any lending question comes up, your SMSF needs to clear three tests that apply to every property purchase, regardless of how it’s funded:
Does the purchase pass the sole purpose test?
The property must exist solely to generate retirement benefits. No member or related party can live in the property, use it for holidays, or receive any present-day personal benefit from it. Any personal use may breach the SMSF’s sole purpose test and should be avoided.
Is the transaction at arm’s length?
Your SMSF generally cannot buy residential property from you, your spouse, your children, or any related party. It must be acquired from an unrelated seller at genuine market value, with documentation to support that price.
Can the property be rented to a related party?
No. Residential property held in an SMSF cannot be leased to a fund member or their relatives under any circumstances, even at full market rent. Commercial property is the one exception; it can be leased back to a member’s own business at market rates.
Failing to meet these requirements may place the fund at risk of regulatory action, including the possibility of being treated as non-complying in serious cases. Independent legal and tax advice should always be sought before proceeding. A consequence severe enough that the SMSF property rules Australia are not something to interpret loosely.
Borrowing: What Genuinely Changed
Until now, an SMSF without enough cash to buy a property outright could use a Limited Recourse Borrowing Arrangement, or LRBA, the only legal way for a super fund to borrow. The property sits in a separate bare trust, and if the loan defaults, the lender’s claim is limited to that one asset, leaving the rest of the fund protected.
On 26 June 2026, the legislation received Royal Assent, and the transition period began. From the commencement date of 10 August 2026, SMSFs can no longer enter into new residential LRBAs.
If you’re mid-process on a residential purchase, exchanging contracts before the commencement date is what protects the deal, not settlement and not loan approval. The transitional window closes fast, and acting without specific advice at this stage carries real risk.
What Stays Open After Mid-August
• Existing residential: LRBAs entered into before the commencement date are expected to continue under the transitional arrangements. Borrowers should confirm how the final legislation applies to their individual circumstances.
• Commercial property: LRBAs are not affected by the proposed residential borrowing restrictions. However, borrowers should confirm lender policies and legislative requirements before proceeding with any commercial SMSF borrowing strategy.
• Cash purchases remain fully available: an SMSF can still buy residential property outright using existing fund balance, just without borrowed leverage
• SMSF tax treatment generally remains concessional: Rental income is typically taxed at 15% during the accumulation phase, while tax outcomes in the pension phase depend on eligibility, fund compliance and current legislative requirements. Investors should seek independent tax advice for their circumstances.
Most lenders writing SMSF property loan arrangements currently require a meaningful deposit, plus a sufficient fund balance to cover stamp duty, conveyancing and an ongoing cash buffer. Publicly available SMSF loan comparisons in June 2026 show residential SMSF loan rates commonly starting in the mid-to-high 6% range, though actual pricing varies by lender, loan type, LVR, repayment type and borrower profile.
Where OM Financials Fits In
Whether you have an existing LRBA, are considering a residential purchase before the commencement date, or are reassessing how an SMSF fits your broader lending strategy, obtaining current professional advice is essential.
Shyam Maggo and the OM Financials team work across more than 50 lenders, including specialist SMSF lenders, to map out exactly what remains genuinely available to you. As an experienced mortgage broker Australia investors work with for SMSF lending strategies, the team helps borrowers understand lender requirements, structure options and available finance pathways. Book a free consultation at omfinancials.com.au before making any decisions. Follow OM Financials on Instagram, Facebook, YouTube and LinkedIn for updates as the legislation finalises.
Frequently Asked Questions
Q: Can my SMSF still buy a residential property without borrowing?
Answer: Yes. Cash purchases using existing fund balance remain available and are not affected by the residential LRBA borrowing change.
Q: Will my existing SMSF property loan be cancelled?
Answer: Existing residential LRBAs entered into before the commencement date are expected to continue under the transitional arrangements. Borrowers should confirm how the final legislation applies to their own circumstances.
Q: Can I rent an SMSF-owned property to a family member at a discount?
Answer: No. Any lease to a related party, even at a reduced rate as a favour, breaches the sole purpose test and can trigger serious tax penalties.
Q: Does the borrowing ban affect commercial property purchases through my SMSF?
Answer: Current legislative changes are focused on residential property borrowing. Commercial property LRBAs are expected to continue, subject to existing SMSF rules, lender policies and legislative requirements.