Date: 20 July 2026
The rules for SMSFs investing in residential property have changed.
Following the passage of the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, SMSFs will no longer be able to use a Limited Recourse Borrowing Arrangement (LRBA) to purchase residential property from 10 August 2026. The legislation received Royal Assent on 26 June 2026, triggering the 45-day transition period before the new rules commence.
What does this mean?
From 10 August 2026:
- SMSFs cannot enter into a new LRBA to acquire residential property.
- Existing residential property LRBAs remain unaffected.
- Existing residential property loans can continue and may be refinanced, subject to the existing LRBA rules.
- SMSFs can still purchase residential property using available fund cash (without borrowing).
What is still allowed?
The changes do not impact borrowing arrangements used to acquire business real property, such as commercial premises used in a business.
SMSFs can continue to use LRBAs for:
- Eligible commercial property that qualifies as business real property.
- Certain share and managed fund investments where permitted under existing LRBA rules.
Importantly, properties that do not qualify as business real property, such as mixed use properties, vacant land or farming land not currently running a business will not be able to be purchased using an LRBA.
Existing arrangements protected
Importantly, the legislation includes grandfathering provisions. SMSFs that entered into a residential property purchase contract before the commencement date can continue with that acquisition, even if settlement occurs after 10 August 2026. Existing residential property borrowing arrangements are also protected.
What should trustees consider?
For SMSF trustees who were considering a leveraged residential property investment strategy, this option is now effectively closed for new acquisitions from 10 August 2026. Future property investment strategies may need to focus on:
- Direct purchases using existing SMSF cash.
- Commercial property opportunities.
- Diversified investment portfolios including shares and managed funds.
Need advice?
If you would like to discuss how these changes may affect your SMSF investment strategy, please contact our team.
This article is general information only and does not constitute financial or taxation advice. You should seek professional advice tailored to your circumstances before making any investment decisions.
