On 10 August 2026 a door closed. A self-managed super fund can no longer enter a new limited recourse borrowing arrangement to acquire residential property. Plenty has been written about what that means inside the fund. Almost nothing has been written about the obvious next question.
If the leverage cannot go there any more, where does it go?
It did not disappear. Borrowing capacity is not a feature of superannuation. It is a function of income, equity, servicing and structure, and every one of those still exists on 11 August. What changed is the address, not the amount.
Leverage was never a super strategy
This is the part that gets lost. For most people who came to SMSF property in the last decade, the fund was the vehicle and the borrowing was the engine. The two arrived together, so they came to feel like one thing.
They were never one thing. The fund is a tax and preservation structure. The borrowing is a credit structure. They were bolted together by section 67A and a bare trust, and on 10 August the bolt was removed for one class of asset.
Which means the honest question is not “how do I get my SMSF to keep borrowing.” It is “what is this borrowing actually for, and where should it now sit.”
Five things behave differently outside the fund
Borrowing in your own name, or through a company or a trust, is not SMSF borrowing with the super removed. It runs on different mechanics, and the differences are structural rather than cosmetic.
1. The single-asset rule stops applying
Inside an LRBA, borrowed money must acquire a single acquirable asset held in a separate trust, and that asset cannot fundamentally change character. It is why borrowing to build on land the fund already owned never worked. Outside the fund, that constraint is simply absent. Renovation, subdivision, staged development and second charges are ordinary credit questions again rather than compliance questions.
2. Serviceability is assessed on you, not on the fund
An SMSF loan is assessed on the fund’s income — contributions and rent, against the fund’s liabilities. Outside, it is assessed on your income and your existing commitments, under the APRA buffer. For a high-income professional those are two very different pictures, and they frequently point in opposite directions. People are often surprised to find their capacity outside the fund is larger, and equally surprised to find it is smaller.
3. Recourse is no longer limited
The “limited recourse” in LRBA is not decoration. In a default, the lender’s security is confined to that one property and cannot reach the fund’s other assets. That protection does not travel with you. Ordinary lending is full recourse, and where loans are cross-secured a problem with one asset can reach the others. This is the single most under-considered difference, and it is a structuring decision made at application, not something fixed afterwards.
4. Equity becomes reusable
A fund cannot readily recycle equity out of an LRBA property. Outside, equity release, redraw and offset are standard tools, which is what allows one asset to become the deposit for the next. That is the compounding mechanism most SMSF structures never had access to, and it is the reason a portfolio outside super can move faster even when it starts from less.
5. The entity is now a live choice
Inside super there is one answer: the fund, through a bare trust. Outside, the same purchase can sit in a personal name, joint names, a company, or a discretionary or unit trust — and lenders treat each differently on servicing, guarantees and documentation. The entity decision drives the lending outcome, which is why it belongs at the start of the process rather than at the conveyancing stage.
What you give up, said plainly
Moving leverage outside super is not a free upgrade, and anyone selling it as one is not showing you the whole ledger.
Inside the fund, earnings are taxed in a concessional environment, and the treatment shifts again in pension phase. Outside, income and gains are taxed in the hands of whoever owns the asset, at their rates. Land tax thresholds differ by entity and by state. Asset protection differs. Estate outcomes differ.
Those are not credit questions and I do not answer them. They are decisions for your accountant and your licensed adviser, and the sequencing matters — the tax and structuring answer should arrive before the lending is arranged, not after a contract is signed.
And what remains inside the fund
None of this means the fund is finished. Existing residential arrangements are grandfathered and continue on their terms. Refinancing one is expressly preserved — same asset, same or a new lender — so an existing SMSF loan can still be rate-shopped without losing its protection. A fund can still buy residential property outright with its own cash, because that was never a borrowing question. And borrowing to acquire business real property remains available, subject to that property continuing to meet the test for the whole life of the loan.
So the picture is not “super, or outside super.” For most people it becomes both, holding different assets for different reasons, with the borrowing placed where it actually works.
The question worth bringing
Not “can I still borrow.” You can. The question is which structure should hold the debt, given your income, your existing security, your fund’s position and what you are trying to have happen by a particular year.
That is a structuring conversation, and it is considerably easier to have before anything is signed than afterwards.
That conversation is what a discovery session is for. And if you would rather see the trajectory before you have it, the Wealth Path Calculator takes three minutes.
(This is general information, not personal financial, tax, legal, or credit advice.)
Juan Jeffery
Strategic Property & SMSF Advisor | CR 464548
Healthy Wealthy Investor
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