SMSF Property Borrowing Rules: Changes to LRBAs
By Daniel Shaw Date: 20 August 2026 Tags: SMSF, Superannuation, LRBA, Property
From the 10th of August 2026, SMSFs will no longer be able to enter into a Limited Recourse Borrowing Arrangement (LRBA) to acquire real property other than business real property.
An LRBA is a borrowing arrangement that allows an SMSF to purchase property using borrowed funds, with the lender’s rights generally limited to the property itself if the loan defaults.
Importantly, the new rules do not distinguish between residential and commercial property. The key question is whether the property satisfies the definition of business real property.
To understand how the new rules apply in practice, it is necessary to understand what constitutes business real property.
Many SMSF trustees may not be familiar with this definition, making it important to understand before entering into any new borrowing arrangement.
Broadly, business real property is an eligible interest in land or buildings that is used wholly and exclusively in one or more businesses.
It is common for property that was previously used for residential purposes to later be used for commercial activities, such as a house being converted into medical suites.
If real property previously used for residential purposes is intended to be used as medical suites or other commercial premises, it must satisfy the definition of business real property when the LRBA is entered into.
Where real property satisfies the business real property requirements at the time an LRBA is entered into, it must continue to satisfy those requirements for the duration of the arrangement.
If the real property stops being business real property whilst being financed under the LRBA, the SMSF will breach the law against borrowing and compliance action may apply.
Where an SMSF exchanged a binding contract to acquire real property prior to 10 August 2026, the acquisition may proceed under the existing arrangements and the LRBA will not be affected by the new rules.
Further, later variations to the contract will not change this, however if the contract is changed significantly and the fundamental terms no longer exist, it may be considered that a new arrangement has begun.
Existing LRBAs entered into before 10 August 2026 are unaffected by these changes and may continue to be maintained or refinanced.
For further assistance, or if you are considering purchasing property through your SMSF, please contact Daniel Shaw, Director, SMSF Specialist Adviser and Head of Superannuation, who can discuss how these changes may affect your circumstances.
The information provided does not constitute financial product advice. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you obtain your own independent professional advice before making any decision in relation to your particular requirements or circumstances.
