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 set to be banned from borrowing to buy residential property. Here’s the plain-English version, including the part that actually matters: the timing.
Heads up: at the time of writing this is announced government policy attached to a budget bill that is expected to pass the Senate but is not yet law. Details can change as the legislation is finalised. 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 budget deal will ban new LRBAs for residential property. 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 ban takes effect 45 days after the budget bill receives royal assent. With the bill expected to clear the Senate shortly, that points to commencement from around mid-August 2026.
- Contracts signed before the ban commences are not affected. If you’re already mid-purchase with a contract signed before that date, the LRBA can proceed.
- Existing SMSF loans are exempt. If your fund already has an LRBA in place, it can continue as is.
So there is a narrow window — but it is genuinely narrow, and rushing a major super decision to beat a deadline is exactly the wrong reason to make it. More on that below.
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.)
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, timing now matters — a contract signed before commencement 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 24 June 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 was not yet law at the time of writing.