SMSFs Can No Longer Borrow to Buy Residential Property

On 23 June 2026, the government struck a deal with the Greens to pass its tax reform package through the Senate. Part of the deal closes a borrowing arrangement self-managed super funds have relied on since 2007, but only for residential property. If you run an SMSF and you've been weighing up a property purchase, the rules have shifted, and where your plans sit, residential or commercial, now changes everything.

Here's the plain-English version of what changed, who it affects, and what it means if you already have a purchase underway.

What actually changed

Until now, an SMSF could borrow to buy residential property using a limited recourse borrowing arrangement (LRBA). The structure allows the fund to take out a loan in which the lender's only security is the property itself, so the fund's other assets remain outside the lender's reach if things go wrong.

As part of the Senate deal, the government has agreed to remove the ability for SMSFs to use these arrangements to buy residential property. The change is prospective, which is the important word. It applies to new arrangements going forward, not to property your fund already holds.

Existing arrangements are protected

If your SMSF already owns residential property through an LRBA, nothing about today's announcement forces you to unwind it. The change does not reach back and undo loans already in place.

The protection extends further. Contracts signed before the change commences are also covered. The Treasurer confirmed the government would “leave the existing arrangements in place for those existing investments,” with the new rules applying only to arrangements going forward. So a purchase genuinely committed to beforehand should not be caught.

This is a ban on new borrowing to buy, not a clawback of what SMSFs already own or have already contracted to buy.

Is there still a window?

This is the question we're already fielding, and the answer comes with a number attached. The ban takes effect 45 days after the legislation receives royal assent, and existing arrangements plus signed contracts are protected. So the clock hasn't even started yet, and a residential purchase genuinely in progress has a defined runway rather than an open-ended one.

Those 45 days sound generous until you account for how long a new SMSF property loan takes to stand up. Most major banks left SMSF residential lending years ago, so the funding sits with a smaller pool of specialist lenders (which we have access to). Add the bare trust, the fund compliance steps, and loan approval, and the practical setup can run close to or beyond the window for anyone starting cold. The clock, not the law, becomes the real constraint.

If you have a contract in train or an LRBA being finalised, the sensible move is to confirm where it sits against the 45-day window and make sure the timing is documented properly. 

Commercial and business premises look different

The change targets residential property. The borrowing arrangement most relevant to a lot of business owners around Bankstown and across south west Sydney, buying your own commercial premises through your fund, sits outside it.

Using an SMSF to buy commercial property has been a deliberate, long-standing feature of the super system, not a loophole. A tradie, retailer, or professional can hold their own premises inside the fund, have the business pay market rent, and build retirement savings while keeping the business in a building it controls. Independent advisory commentary has made the same point since the changes were announced: the negative gearing and borrowing reforms are residential-specific, and commercial property, including business premises leased to a related party at market rent, keeps its standing as a legitimate, tax-efficient structure.

One caution. The final detail rests on the legislation as drafted. If a commercial purchase through your fund is on your radar, it's worth a conversation now to understand where you stand.

What this means for your finance

Whether you're protected, mid-transaction, or rethinking your approach, the finance question sits at the centre of it. If you already hold an SMSF property loan, this is a good moment to review how it's structured, what your rate looks like against current lenders, and whether the arrangement still suits the fund. If you have a purchase underway, getting clarity on loan timing and settlement against the 45-day window is the priority.

And if the SMSF route is now off the table for a purchase you'd been planning, there are other ways to structure a property loan worth talking through before you change direction. We are lending specialists, so a chat with Nahil Chidiac at Citywide LPI Bankstown should be your first move to determine the right steps for you. 

This article covers a recent policy change and is general information only. It is not financial, tax, or credit advice, and it doesn't account for your personal circumstances. SMSF borrowing and property decisions carry real risk and should always involve your accountant or financial adviser. For the finance side of an SMSF or standard property purchase, Nahil Chidiac at Citywide LPI Bankstown can talk through your options.