As of 10 August 2026, a self managed super fund can no longer enter into a new limited recourse borrowing arrangement to buy residential property. Loans already in place are grandfathered, and funds can still borrow to buy business real property, so this is a change to what happens next rather than a rewrite of what already exists.
The measure passed as part of the government’s broader superannuation tax package, which received Royal Assent on 26 June 2026 after a deal with the Greens. The start date fell 45 days later, which is why the practical change landed only last week.
What actually changed
A limited recourse borrowing arrangement, usually shortened to LRBA, is the structure that lets an SMSF borrow to buy a single asset. The lender’s recourse is limited to that asset, so other fund assets are protected if the loan goes bad. It has been the standard way for a fund to buy a property it could not afford outright.
The amendment inserts a condition on new arrangements: where the asset is real property, it must be business real property as defined in the Superannuation Industry (Supervision) Act. That definition covers land and buildings used wholly and exclusively in one or more businesses, which is why a warehouse, a factory, a consulting room or a shopfront can still be bought with borrowed money inside super, and a suburban rental cannot.
The distinction is stricter than it sounds. A shop with a flat above it, or a block held vacant for future development, will often fail the wholly and exclusively test. Anyone assuming a mixed use site qualifies should get that confirmed in writing before signing anything.
What is still allowed
Three carve-outs matter, and they cover most people who were already partway through something.
Existing residential LRBAs are grandfathered. If your fund already holds a geared residential property, nothing about the loan or the asset is affected, and there is no requirement to sell or repay early.
Refinancing is still permitted. The legislation excludes maintaining or refinancing a borrowing entered into before commencement, so a fund with an existing residential LRBA can move to a different lender or a better rate without losing its protected status. That is worth knowing given how much lender pricing has moved this year.
Contracts exchanged before 10 August 2026 are also protected, even if settlement happens after that date. A fund that was mid purchase when the rules changed should generally be able to complete.
None of that removes the ordinary obligations that come with an LRBA, including the sole purpose test, the single acquirable asset rule and arm’s length terms. Those all still apply.
How big is the affected slice
SMSF borrowing is a large number in isolation and a small number in context. On the Australian Taxation Office’s quarterly statistics for the March 2026 quarter, there were roughly 672,800 funds holding about $1.06 trillion in assets, with LRBA assets of around $80 billion against borrowings near $29.4 billion.
Set against the national mortgage market, geared SMSF residential lending has been reported as well under 1% of residential property borrowing. That is part of why the measure raises relatively little revenue, and part of why the debate about it has been more about principle than scale. Supporters argue super should not be a leveraged vehicle for the housing market. Critics argue the change removes a legitimate diversification option from people who used it carefully, and that it does nothing to address supply.
If you were planning to buy inside super
The first thing to establish is whether you are inside a carve-out. A signed contract before 10 August 2026, or an existing loan, puts you in a different position from someone who was still shopping.
If you were still shopping, the realistic options have narrowed to three. A fund can buy residential property outright with cash it already holds, which is unchanged and still permitted. It can borrow for business real property instead, which suits small business owners who want to hold their own premises in super. Or the purchase can happen outside super in your own name or a trust, where ordinary lending rules and ordinary tax rules apply.
That third path is the one most people will end up considering, and it is a genuinely different exercise from an SMSF purchase, with different deposit, tax and holding cost maths. If that is where you are heading, it is worth working through the real cost of buying and holding an investment property in your own name before assuming the numbers carry across. Our explainer on how an SMSF actually works and what it costs to run is a useful starting point on the structure itself, and the basics of buying an investment property covers the mechanics outside super.
Grandfathering protects the deal you already signed, not the deal you were about to sign.
Where to confirm the rules
Every figure and date here is current as at 17 August 2026 and should be treated as a snapshot. The Australian Taxation Office’s guidance on changes to limited recourse borrowing arrangements is the primary source, and your fund’s auditor or a licensed SMSF specialist can confirm how the rules apply to a specific arrangement.
This article is general information only and is not personal financial, tax or legal advice. SMSF rules are unforgiving, penalties for getting a borrowing arrangement wrong can be significant, and outcomes depend on your fund’s deed, balance and circumstances. Get advice tailored to you before acting.
The bottom line
From 10 August 2026, new SMSF borrowing to buy real property is limited to business real property, which effectively ends geared residential purchases inside self managed super. Existing loans are grandfathered, refinancing is still available, and contracts exchanged before the start date are protected. If your fund already owns a geared rental, nothing needs to happen today. If you were planning that purchase, the structure you were counting on is no longer available, and the decision now is whether the property makes sense outright inside super, as business premises, or outside super altogether.