For many years, Self-Managed Super Funds (SMSFs) have been able to borrow to purchase residential investment property through a Limited Recourse Borrowing Arrangement (LRBA).
That opportunity is about to close.
Legislation to implement these changes has now passed both Houses of the Federal Parliament. Once the changes commence, SMSFs will no longer be able to borrow to acquire residential property.
Can an SMSF Still Buy Residential Property?
Yes. An SMSF can still purchase residential property using its existing funds. The changes only affect borrowing to acquire residential property. Borrowing to acquire eligible commercial property will continue to be available.
The new rules are expected to commence on 10 August 2026.
The transitional provisions will only protect arrangements entered into before the commencement date. In most cases, this is expected to mean that contracts must be exchanged before 10 August 2026, even if settlement takes place afterwards. However, these arrangements are often complex, and clients should seek advice specific to their circumstances.
SMSF property purchases involve much more than simply signing a contract. They typically require the SMSF structure to be reviewed or established, finance to be approved, a holding trust (known as a bare trust) to be created, and the transaction documentation to be carefully prepared.
For clients who are already well advanced, there may still be an opportunity to proceed under the current rules. However, anyone considering this strategy should seek advice as soon as possible.
We’re Here to Help
These changes are important not only for SMSF trustees, but also for accountants, financial advisers, finance brokers and developers assisting clients with SMSF property purchases.
Penmans has extensive experience acting on SMSF property transactions and offers a comprehensive fixed fee package covering the legal documentation required for an SMSF property purchase, including the preparation and stamping of the bare trust, expert conveyancing, and the independent legal advice required for guarantors for the LRBA.
We regularly work alongside accountants, financial advisers and finance brokers to help clients complete these transactions efficiently.
If you are considering purchasing residential property through your SMSF please contact our team as soon as possible so we can help to ensure your arrangements are in place before the changes take effect.
Frequently Asked Questions
Can my SMSF still buy residential property?
Yes. An SMSF can still purchase residential property using its own funds. The changes only affect borrowing to acquire residential property.
Can my SMSF still borrow to buy commercial property?
Yes. Borrowing by an SMSF to acquire eligible commercial property is not affected by these changes.
What if my SMSF purchase is already underway?
Transitional provisions are expected to protect arrangements entered into before the commencement date. If your purchase is already underway, you should seek legal and financial advice as soon as possible to ensure your transaction can proceed under the existing rules.