If buying an investment property through your self-managed super fund (SMSF) has been on your radar, there’s an important change to know about. As part of a budget deal between Labor and the Greens — struck to get the government’s capital gains tax and negative gearing changes through the Senate — SMSFs are banned from borrowing to buy residential property from 10 August 2026. Here’s the plain-English version, including the part that actually matters: the timing.
Status — now law: the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 passed both houses of Parliament on 25 June 2026 and received royal assent on 26 June 2026. The ban commences 10 August 2026. This is general information only — see the advice note at the end.
What’s changing
Super funds generally can’t borrow to invest. The one exception is a Limited Recourse Borrowing Arrangement (LRBA) — a special loan that lets an SMSF borrow to buy property. The legislation bans new LRBAs for residential property from 10 August 2026. From commencement, an SMSF can only use an LRBA to buy real property that is business real property (commercial) under the SIS Act. The stated aim is to stop SMSFs bidding against renters and first home buyers at auction.
- What’s banned: new borrowing (LRBAs) to buy residential property inside an SMSF.
- What’s not: using an LRBA to buy commercial property is unaffected — a common strategy for small business owners buying their own premises.
The dates that matter
This is the part to pay attention to:
- The Act received royal assent on 26 June 2026, which starts the 45-day transition clock: the ban commences on 10 August 2026.
- A signed contract before 10 August 2026 is the dividing line. It’s the contract (exchange) date that counts — not settlement. Purchases with a contract signed before 10 August are grandfathered and can proceed through to settlement, even if formal loan approval is still pending. No signed contract by then means no transitional protection.
- The window to 10 August is to complete deals, not start new ones. It exists so transactions already underway can be secured — not as an invitation to rush into a new purchase.
- Existing SMSF loans are exempt. If your fund already has an LRBA in place, it can continue as is.
So the window is real but closing: as at early July 2026 there are only weeks left. Rushing a major super decision to beat a deadline is still the wrong reason to make it — but if you’re already mid-purchase, your contract date is now everything.
On the “broken promise” framing. Only last year the government said it had “no intention” of banning SMSF borrowing, so this is a sharp reversal that’s caught many funds off guard. It’s also a reminder that super and tax rules change — which is why any property-in-super strategy should stand on its own merits, not on today’s rules staying put.
How SMSF property borrowing works (quick recap)
Under an LRBA, the property is held in a separate trust until the loan is repaid, so your other retirement savings are protected if the loan defaults. A few practical realities:
- You typically need a 20–30% deposit, paid from your super balance along with costs like stamp duty and conveyancing; ongoing contributions then service the loan.
- The big banks left this market years ago — SMSF loans now come from second-tier lenders, and rates sit higher than standard home loans (recently in the low 7% range for a 20% deposit loan).
- You can’t redevelop the property while the loan is in place — only repair or renovate.
There’s more detail on our SMSF property loans page.
What this doesn’t change
- Buying property in super without borrowing is unaffected — a fund with enough cash can still purchase outright.
- Commercial property via an LRBA continues.
- The tax features of holding property in super remain. Following May’s budget, an SMSF is one of the few places you can buy an established residential property as an investment and still negatively gear it, and super funds were left out of the budget’s CGT changes. In accumulation phase, capital gains in super get a one-third discount (an effective 10% rate), and assets sold in the retirement phase can be tax-free within your transfer balance cap. (See our explainer on the 2027 negative gearing & CGT changes.)
If you already have an SMSF loan: the refinancing question
This is the part worrying many in the industry, and it’s worth flagging honestly. Your existing loan is exempt and can continue — but now the ban is law, there are real concerns that existing SMSF borrowers may not be able to refinance to a different loan. That could leave some people stuck on an uncompetitive rate — what brokers are starting to call an SMSF “mortgage prison”.
If you hold an existing SMSF residential loan, it’s worth reviewing your options now, while the current framework still applies, rather than finding your choices narrowed later.
The rules and the risks — read this part
SMSF property isn’t a shortcut, and it isn’t for everyone. The rules are strict and the risks are real:
- Sole purpose test: the property must be for retirement benefit only. You (or any relative) can’t live in it or holiday in it, and you can’t sell a property you already own into your fund.
- Liquidity: the fund needs enough cash for rates, maintenance, a vacancy or rate rises — a single property can leave a fund undiversified and cash-poor.
- Spruikers: regulators have repeatedly warned about high-pressure operators pushing SMSF property. If someone is rushing you — especially “before the ban” — that’s a red flag, not a reason.
What to do if this affects you
If you already have an SMSF and a genuine, advised plan to buy residential property through it, the clock is real: only a contract signed before 10 August 2026 preserves your ability to borrow. If you’re only just considering it, the deadline is not a reason to rush; it’s a reason to get proper advice quickly and then decide calmly.
Either way, the right order is licensed financial and SMSF advice first, lending second. 365 Home Loans can help you understand and arrange SMSF lending (an LRBA) where it’s appropriate and you’re already getting the right professional advice — and we’ll give you a straight answer on whether the timing is realistic for your situation.
General information only, current as at 3 July 2026, and not financial, tax, credit or legal advice. Whether an SMSF — or borrowing inside one — is right for you depends on your full circumstances; get advice from a licensed financial adviser and SMSF specialist before acting. The legislation referenced here (Treasury Laws Amendment (Tax Reform No. 1) Act 2026) received royal assent on 26 June 2026.