SMSF audience guide
SMSF for property investors: the 2026 borrowing rules, bare trusts and what still works
An SMSF is one of the few super structures that can hold direct property. From 10 August 2026 the rules changed: an SMSF can no longer enter a new Limited Recourse Borrowing Arrangement to buy residential property. Existing residential LRBAs are grandfathered, commercial (business real property) LRBAs are unaffected, and outright cash purchases are still allowed. Here's how each path works.
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How SMSF property investing works in 2026
Under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, new LRBAs over real property are limited to business real property from 10 August 2026. In practice that means three live paths: buy commercial property with an LRBA, buy residential property outright with fund cash, or keep running an existing residential LRBA entered into before 10 August 2026 — which is fully grandfathered.
With an LRBA, a separate bare trust is established to hold legal title to the property; the SMSF holds beneficial ownership and makes the loan repayments. The lender's recourse on default is limited to that property — the other SMSF assets are protected. easySMSF prepares the bare trust and custodian company for commercial purchases, and provides full ongoing administration, accounting, loan reconciliation and audit for grandfathered residential arrangements.
Residential property cannot be acquired from a related party (e.g. you can't sell your own investment property to your SMSF) and cannot be leased to a related party. Commercial property is more flexible: business real property — broadly, real estate used wholly and exclusively in one or more businesses — can be acquired from a related party and leased back, provided the rent is set at arm's-length commercial rates.
Whichever path you take, the property has to satisfy the sole-purpose test in section 62 of the SIS Act: the fund must be maintained for the sole purpose of providing retirement benefits. "Holiday house for the family" fails the sole-purpose test, even if it's also rented out — and the ATO is very willing to issue penalties on that breach.
- Hold residential or commercial property directly inside super
- New residential LRBAs prohibited from 10 August 2026 — residential must be bought outright with fund cash
- Existing residential LRBAs entered before 10 August 2026 are grandfathered and fully administered by us
- Commercial LRBAs still permitted — non-recourse lender, separate bare trust
- Business real property: acquire from related party + lease back at commercial rent
- Rental income and capital gains taxed at 15% in accumulation, 0% in retirement phase
- Sole-purpose test (s62 SIS Act) applies — no personal use allowed
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General advice warning
Figures shown are illustrative only and based on the inputs and assumptions you provide. They are general information, not personal financial product advice. Consider your objectives, financial situation and needs, and seek personal advice from a licensed financial adviser before acting. easySMSF does not hold an Australian Financial Services Licence (AFSL).