Updated 17 August 2026
If you’ve spent ten minutes in the SMSF forums this week, you already know the mood. SMSF property is dead. You can only buy new builds now. The borrowing window’s shut. You’ve seen some version of all three — and the people repeating them have one thing in common: not one has quoted the section of the Act that actually changed. The panic is real. The premise underneath it usually isn’t.
So before anyone folds a viable position on a rumour, it’s worth two minutes to see what the law actually did — and, just as much, what it left standing.
The short answer: Yes — an SMSF can still own residential property, and in defined cases still borrow. The 2026 change sits in Schedule 5 of the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Act No. 49, 2026). It received Royal Assent on 26 June 2026 and commenced on 10 August 2026. It prohibits a self-managed super fund from entering a new limited recourse borrowing arrangement (LRBA) to acquire residential property. It did not ban SMSF property investment, and it did not restrict funds to new builds. Four routes survive the change. The borrowing door narrowed; the ownership door stayed open.
Two myths are doing real damage right now, so let me separate what changed from what didn’t — because the gap between them is where funds are making expensive decisions on bad information.
At a glance
| What | The detail (from the Act itself) |
|---|---|
| What changed | A new LRBA to acquire residential property is prohibited |
| The mechanism | New paragraph s67A(2)(c) of the SIS Act: for real property, the asset must be business real property (within the meaning of s66) |
| The Act | Treasury Laws Amendment (Tax Reform No. 1) Act 2026 — Act No. 49, 2026 (Schedule 5) |
| Royal Assent | 26 June 2026 |
| Commencement | 10 August 2026 — the 45th day after Assent |
| Existing LRBAs | Grandfathered — unaffected |
| Refinancing a pre-commencement LRBA | Expressly preserved by the Act |
| Contract exchanged before commencement | Protected — even if settlement happens after |
| Business real property LRBAs | Untouched — still available |
| Buying residential with the fund’s own (unborrowed) cash | Never restricted |
What actually changed in 2026
The change restricted new residential LRBA borrowing — and it did so with a single, precise amendment. Schedule 5 of the Act adds one paragraph to the end of subsection 67A(2) of the Superannuation Industry (Supervision) Act 1993:
“…the asset is business real property (within the meaning of section 66 of this Act).”
That is the whole mechanism. From commencement, if an SMSF borrows under an LRBA to acquire real property, the property must be business real property — premises used wholly and exclusively in a business. Residential dwellings don’t meet that test, so a new LRBA can no longer be used to buy them. It is not a ban on SMSFs owning residential property, and it is not a rule that confines funds to new construction.
It is worth being blunt about the second myth, because it travels fast. The restriction is on borrowing to acquire residential property — both existing dwellings and new builds. So the comforting idea that “new builds are the surviving route” is not just optimistic; it is backwards. If your plan rested on borrowing to build a new residential dwelling inside the fund under a fresh LRBA, that is precisely the route the change closed. Anyone still selling that as the workaround is working from last year’s playbook.
What didn’t change — the four surviving routes
Here is the part the headlines skip. Four routes through to residential or business property in super survived the 2026 change:
1. An SMSF can still buy residential property outright. Ownership through super was never restricted. A fund with the cash or equity to purchase unencumbered sits entirely outside the borrowing rule, because the restriction is a borrowing restriction. Capital that isn’t borrowed never touches the section 67A wall.
2. Existing residential LRBAs are grandfathered. An arrangement already in train is protected where the contract was entered into before commencement — and protection holds even if settlement falls after commencement. The trigger is the arrangement date, not settlement. If you are mid-transaction, the dates decide everything.
3. Business real property LRBAs remain available — with one continuing condition. The change leaves borrowing to acquire business real property — the exact term used in section 66 of the SIS Act — available. The ATO’s guidance (QC 107811, 28 July 2026) adds an obligation worth knowing before you rely on this route: the asset must continue to be business real property for the entire life of the arrangement, wholly and exclusively used in one or more businesses for the whole term — not only on the day the fund borrows. A vacancy alone does not break it while a new tenant is genuinely being sought; abandoning the intention to lease it as business premises does. Borrowing for business real property is not set-and-forget. This is also the case where a fund can lease the premises back to a member’s own business: a related-party leaseback the in-house asset rules specifically permit for business real property, provided the lease runs on genuine market (arm’s-length) terms.
4. Refinancing a pre-commencement LRBA. Refinancing an existing arrangement is preserved — and this is now settled in the Act’s own words, not left to interpretation (see the next section).
So the honest tally is four routes open, one closed. “SMSF property is dead” mistakes a single closed door for the whole house.
What specialists were unsure about — now resolved
For the fortnight after the deal was announced, three questions had advisers, brokers and lenders genuinely unsure, because the commentary ran ahead of the legislation. The enacted Act answers all three in its transitional provision (Schedule 5, item 2). This is where a lot of published guidance is still hedging, and it no longer needs to.
Refinancing is protected — by the statute itself. The Act says the amendment “does not apply … to the extent that … the arrangement is for maintaining (or refinancing) a borrowing of money under another arrangement entered into before that commencement.” A refinance of a pre-commencement residential LRBA stays within the borrowing exception. The widely repeated “we don’t yet know if the ATO will treat a refinance as a new arrangement” is now overtaken by the words of the Act. (The preserved case is refinancing a borrowing entered into before commencement — a brand-new residential borrowing after commencement is still caught.)
Exchange, not settlement, is the trigger — and it’s in the Act. The transitional Note confirms an arrangement is protected where “the related asset is acquired under an arrangement entered into before that commencement (even if the settlement for the acquisition of the asset happens after that commencement).” If contracts are exchanged before 10 August 2026, a later settlement doesn’t break grandfathering.
The commencement date is fixed. The Act’s commencement table sets Schedule 5 to commence on the 45th day after Royal Assent — 10 August 2026. Any page still treating the date as uncertain is reading pre-assent commentary.
The reason this matters: the difference between a protected arrangement and a prohibited one can turn on a single date, and on which of these carve-outs a fund’s facts actually fall under. That is a reading-the-Act question, not a headline question.
Why section 67A is the rule underneath all of this
Borrowing inside an SMSF has run on one rule since 2010: under section 67A of the SIS Act, borrowed money must acquire a single acquirable asset held in a separate holding trust. That is not a technicality — it is the constraint that decides what an LRBA can and can’t fund.
It also explains why a staged-drawdown construction build never sat comfortably inside an LRBA. The ATO ruling SMSFR 2012/1 is explicit: an SMSF cannot borrow under an LRBA to build a house on vacant land the fund already owns, because that fundamentally changes the asset from “vacant land” to “residential premises” — a different asset. The single-asset rule is why “borrow to develop” was always far narrower than buyers assumed, and why the 2026 change lands on a route that was already tightly fenced.
What are the surviving structures — and which one fits?
This is the question every trustee actually wants answered, and here is the honest version: more than one structure still works after the 2026 changes — but which one fits depends entirely on your fund’s facts. Balance, liquidity, contribution capacity, timing, whether you’re starting fresh or mid-transaction — each points to a different answer.
That isn’t a dodge; it’s the nature of the problem. A structure that suits a cash-rich fund is wrong for a fund that needs leverage, and the reverse. Publishing a one-size template here would repeat the “new builds only” mistake — a plausible headline that costs people money the moment their facts don’t match it.
What I can say plainly: AeFin has mapped the structures that survive the 2026 changes — and they are real, compliant, and fact-specific. Working out which one applies to a given fund is exactly what a structuring conversation is for. It is the difference between assuming the door closed and finding the one still open.
A worked example, anonymised: a fund with roughly $900K sat frozen the week the Bill passed — the trustees read “SMSF property ban” and stopped everything. On review, nothing in their plan was actually banned: their position pointed to one of the surviving routes, and the value at risk was the deal they nearly walked away from, not any breach.
Why this matters more now, not less
When a financing route narrows, the reflex is to assume the strategy is finished. The funds that lose are the ones that act on the myth — they either surrender a viable position or lock into the wrong structure because they believed a headline.
The funds that win treat the narrowing as a reason to get the architecture right: confirm grandfathering status against the 10 August date, size liquidity properly, and match the structure to the fund’s real facts rather than a rule of thumb. The 2026 change rewards precision and punishes assumption — which is the entire case for structuring over shopping.
Frequently asked questions
Did the 2026 changes ban SMSFs from buying residential property?
No. An SMSF can still buy residential property. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 restricted new residential LRBA borrowing — a financing mechanism, not the right to own.
Is it true that SMSFs can now only buy new builds?
No — and this is the more damaging myth because it sounds credible. The change restricts borrowing across residential property, existing and new. Borrowing to build a new residential dwelling under a fresh LRBA is squarely caught.
Can an SMSF still refinance an existing residential LRBA?
Yes. The Act expressly preserves “maintaining (or refinancing) a borrowing of money under another arrangement entered into before … commencement.” Refinancing a pre-commencement residential LRBA stays within the borrowing exception.
I’m mid-purchase — is my arrangement protected?
Generally yes, where the contract was entered into before commencement — protection holds even if settlement happens after. Exchange, not settlement, is the trigger. Confirm the dates precisely.
Can an SMSF still borrow to buy commercial property?
Yes. Borrowing to acquire business real property — property used wholly and exclusively in a business, as defined in section 66 of the SIS Act — was not restricted. Note the continuing condition: ATO guidance requires the asset to remain business real property for the entire life of the arrangement, not only at the time of purchase.
When does the change start?
Schedule 5 commences on 10 August 2026 — the 45th day after Royal Assent (26 June 2026), per the Act’s commencement table.
Does this page tell me which structure to use?
No. This is general information about what changed. The right structure for a specific fund is a fact-specific question for a structuring discussion — not something to pick off a webpage.
Which route is actually yours?
The four routes are real, but only one or two fit any given fund — and the wrong assumption costs either a viable position or a compliance breach. The honest first move isn’t to act; it’s to find out which route your fund’s facts point to.
That’s what a structuring conversation is for. You leave knowing which of the surviving routes fits — or that none does, and why. If there’s nothing to do, you’ll be told. No pressure, no fee for finding out it’s not for you.
Map your fund’s surviving route — book a structuring conversation.
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This is general information, not personal financial, tax, legal, or credit advice. Your circumstances are specific to you; consider obtaining advice from an appropriately licensed professional before acting.
Juan Jeffery — Strategic Property & SMSF Advisor
Credit Representative 464548 · Finsure (Australian Credit Licence 384704)
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