One of the biggest changes to Australian property lending in a decade landed quietly on a Monday. From 10 August 2026, self-managed super funds can no longer take out new loans (formally, limited recourse borrowing arrangements, or LRBAs) to buy residential property. The ban was legislated in the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which received Royal Assent on 26 June 2026 and took effect 45 days later. If you’ve been weighing up an SMSF property purchase anywhere from Geelong to the Bellarine Peninsula to greater Melbourne, the rules of the game have now genuinely changed.
But (and this is the part much of the headline coverage has skipped) the ban is narrower than many investors think. It doesn’t touch existing SMSF loans. It doesn’t stop your fund buying residential property outright without borrowing. And it leaves one significant door wide open: borrowing to acquire business real property. For the self-employed clients we work with every week (tradies, allied health practitioners, professional firms and farmers across Geelong, the Surf Coast and regional Victoria) that last point matters enormously. Here’s what has actually changed, what hasn’t, and what to do if you were mid-purchase when the music stopped.
Since 2007, SMSFs have been able to borrow to buy property through an LRBA: a structure where the asset sits in a separate bare trust and the lender’s recourse is limited to that asset rather than the whole fund. That’s the structure our existing guides to SMSF property investment and SMSF property loans explain, and for residential purchases, it’s now closed to new entrants. From 10 August 2026, a fund cannot enter a new LRBA to acquire real property unless the property qualifies as business real property under the Superannuation Industry (Supervision) Act 1993.
Two things the ban does not do are worth stating plainly, because we’re already hearing confusion. First, it doesn’t force anyone to sell: arrangements entered before the commencement date are grandfathered and can run their course. Second, it doesn’t prohibit SMSFs from owning residential property at all: a fund with sufficient cash can still buy without borrowing, subject to the usual sole-purpose and investment-strategy rules. What’s gone is the ability to leverage super savings into new residential purchases with debt.
The day new residential SMSF borrowing ended. The legislation received Royal Assent on 26 June 2026 and commenced 45 days later, and the trigger for the transitional rules is the date contracts were exchanged, not the settlement date.
Here’s how the main scenarios land under the new rules, based on current ATO and industry guidance. Treat this as a map, not advice: the fine print on your specific situation belongs with your accountant, SMSF adviser and lender.
| Scenario | Position from 10 August 2026 |
|---|---|
| New LRBA to buy residential property | Banned: no new residential LRBAs can be entered |
| New LRBA to buy business real property | Still allowed: property must be used wholly and exclusively in one or more businesses |
| Existing residential LRBA entered before 10 August 2026 | Grandfathered: continues unaffected; no forced sale |
| Refinancing an existing residential LRBA | Generally permitted under industry guidance, typically where the principal balance doesn’t increase: confirm current lender policy and the transitional rules with your adviser |
| Contract exchanged before 10 August 2026, settling after | Transitional protection generally applies: contract exchange is the trigger, though a loan application alone doesn’t automatically qualify |
| SMSF buying residential property outright (no borrowing) | Still allowed, subject to the fund’s investment strategy and the usual SMSF rules |
If your fund entered its LRBA before 10 August 2026, nothing about the new law forces a change. The loan continues, the property stays in the bare trust, and repayments carry on as before. The more interesting question is refinancing. Industry guidance (including from the MFAA, the peak body for mortgage and finance brokers) indicates brokers can still assist clients to refinance existing residential LRBAs, with commentary suggesting the key condition is that the principal balance doesn’t increase. Given SMSF loan rates have historically sat above standard investment rates, a health check on a grandfathered loan is well worth doing; our refinance assessment is a sensible starting point, and we’ll confirm which lenders are active in this space at the time you enquire rather than guessing.
If you were mid-purchase when the rules changed, the date that matters is contract exchange. Purchases where contracts were exchanged before 10 August 2026 generally carry transitional protection through to settlement, even if settlement happens after commencement. But the guidance is equally clear that being “nearly ready” isn’t enough: having submitted a loan application, or holding a pre-approval, doesn’t by itself qualify. If you’re in this position, gather your paperwork now: the dated contract, the bare trust documentation and your finance approval correspondence, and have your adviser confirm the transitional provisions apply before you commit further funds.
Here’s the part of the story that turns this from bad news into a strategy conversation, particularly for business owners. The ban applies to property that is not business real property. Business real property (BRP in the jargon) broadly means an interest in land used wholly and exclusively in one or more businesses. An SMSF can still enter a new LRBA to acquire BRP, which means the long-standing strategy of a business owner buying their premises through their super fund remains alive.
Three details in the definition deserve attention. First, it’s the use of the property that counts, not the zoning: guidance on the changes notes that a commercially zoned property that fails the “wholly and exclusively” business-use test won’t qualify, while a property that genuinely meets the test can. Second, the business using the land doesn’t have to be your own: premises leased to an unrelated business can also qualify. Third, the test is strict: mixed-use properties, or properties that are partly residential, will likely fall outside the definition. A shop with a flat above it is exactly the kind of asset that needs careful professional analysis before anyone assumes it qualifies. And business real property has long enjoyed another advantage under super law: it’s one of the few assets an SMSF can lease to a related-party business at market rent, which is what makes the own-your-premises strategy work. Your accountant or SMSF adviser should confirm all of this against your fund’s circumstances; our commercial property loans guide covers the lending side in more depth.
Consider a scenario we expect to see plenty of on the Surf Coast this year. A Torquay physiotherapist has been renting her clinic space for eight years, watching the rent rise with every review, while her SMSF balance has grown steadily. Before 10 August she’d half-planned to have the fund buy a residential investment unit in Armstrong Creek with an LRBA, that option is now off the table. But the strategy conversation doesn’t end there: because her clinic premises are used wholly and exclusively in a business, they could qualify as business real property, which an SMSF can still borrow to acquire. Instead of paying rent to a landlord, her practice could pay market rent to her own super fund. Whether that stacks up depends on her fund balance, cash flow, diversification and advice from her accountant and financial adviser, but it’s a live option the headlines might have told her didn’t exist. The lending piece is where we come in, alongside her advisers, and our commercial property assessment is the natural first step.
The practical effect of the change is a narrowing of who SMSF property lending is really for. Before 10 August, it was a broad investor product. Now, it’s substantially a business owner’s tool, and that describes a large share of the clients we serve across Geelong, the Bellarine Peninsula, the Surf Coast, Ballarat, Melbourne’s west and regional Victoria. Allied health practices, medical and healthcare businesses, trades and construction businesses, professional firms, childcare operators and farming enterprises all commonly occupy premises that may meet the business real property test: farms, in particular, have long been a classic BRP asset class.
For residential-focused investors, the change is a genuine strategy reset. Buying in your personal name or a trust structure (the territory of our first investment property guide and investment property assessment) remains fully available, and it’s worth remembering this ban arrives alongside other announced reforms, including the negative gearing and CGT changes slated for 1 July 2027. The investors navigating this period best are the ones getting their whole structure reviewed once, properly, rather than reacting to each headline as it lands.
If you’re a business owner even loosely considering buying your premises through super, get the sequence right: fund review and advice first, property second, finance structure third. The “wholly and exclusively” business-use test is applied to the facts of the property, so have your accountant or SMSF specialist assess the specific premises (not just the zoning certificate) before you fall in love with a building. Then talk to a broker about which lenders are currently writing SMSF commercial loans and on what terms, because appetite varies significantly between lenders and changes over time. We coordinate with your accountant and adviser so the lending structure matches the advice, not the other way around.
Only if the property qualifies as business real property: land used wholly and exclusively in one or more businesses. New limited recourse borrowing arrangements for residential property are banned from 10 August 2026 under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026. An SMSF can still buy residential property outright without borrowing, subject to the usual SMSF rules. Confirm how the rules apply to your fund with the ATO and your SMSF adviser.
Existing LRBAs entered before 10 August 2026 are grandfathered: they continue unaffected and there is no forced sale. Industry guidance indicates refinancing an existing residential LRBA generally remains possible, with commentary suggesting the principal balance shouldn’t increase. Lender appetite for SMSF refinancing varies, so speak to your broker and adviser about current options before acting.
Business real property broadly means an interest in land used wholly and exclusively in one or more businesses. Actual use is what counts, not zoning: mixed-use or partly residential properties will likely fail the test. The occupying business doesn’t need to be related to the fund, and business real property is also one of the few assets an SMSF can lease to a related-party business at market rent, which is what makes the own-your-premises strategy possible. Whether a specific property qualifies is a question for your accountant or SMSF specialist.
Generally no: the transitional rules protect purchases where contracts were exchanged before 10 August 2026, even if settlement occurs afterwards. The trigger is contract exchange, not settlement, and guidance is clear that a loan application or pre-approval on its own doesn’t automatically qualify. Keep your dated contract, bare trust documents and finance approval correspondence together, and have your adviser confirm the transitional provisions apply to your purchase.
Whether you hold an existing SMSF loan worth reviewing, run a business and want to explore buying your premises through super, or need a new plan for your next investment property: we’ll map the lending options and work alongside your accountant and adviser. Serving Geelong, the Bellarine, the Surf Coast, Melbourne and clients Australia-wide.
With years of experience in mortgage broking and finance, Melanie helps first home buyers, refinancers, investors and business owners across Geelong, the Bellarine, the Surf Coast, Melbourne and regional Victoria make their money work harder. Contact our team on 03 9020 2699.
