“Our SMSF is buying property with borrowed money. Do the new rules affect the deal we are currently working on?”

For SMSF trustees considering property, this is one of the more important rule changes of the year.

Changes to the SMSF borrowing rules became law on 26 June 2026, limiting the types of property that can now be purchased using a limited recourse borrowing arrangement, or LRBA. And if you already have a transaction underway, the date 10 August 2026 matters.

What has changed?

SMSFs can still borrow in limited circumstances, but where an SMSF borrows to purchase property under the new rules, that property generally needs to satisfy the definition of business real property.

This is important because business real property is determined largely by how the property is used, rather than what it looks like or how it is zoned.

That is why simply saying “residential property is banned” does not tell the whole story.

For example, a residential-style terrace that is used wholly and exclusively as a medical practice could potentially satisfy the business real property definition. On the other hand, a property that looks commercial could potentially fail where there is mixed business and residential use on the same title.

The 10 August transitional deadline

The new legislation includes a 45-day transitional period ending 10 August 2026.

That may allow some non-business-real-property transactions already underway to proceed under the previous rules where the relevant arrangement to purchase the property was entered into on or before that date, even if settlement occurs later.

Because that test is highly dependent on the particular transaction, trustees with deals already underway should seek specialist advice urgently rather than assuming they qualify.

What about existing SMSF loans?

The new rules allow existing LRBAs over non-business-real-property assets to continue.

Existing arrangements can also potentially be refinanced, subject to lender availability and approval. That means trustees with an existing SMSF residential property loan do not necessarily need to rush out and sell the property because the rules have changed.

What should trustees do?

If you are considering an LRBA, ask:

• What is the property actually used for?
• Does that use satisfy the business real property definition?
• Is there any mixed private or residential use?
• Has a purchase arrangement already been entered into?
• Could the transitional provisions apply?
• Does the SMSF’s investment strategy still support the transaction?

And because borrowing inside an SMSF involves super, tax, legal and lending rules at the same time, this is very much an area where the paperwork matters.

Final thought

The new rules do not completely shut the door on SMSFs borrowing to buy property. They do, however, make the doorway much narrower.

If your fund is currently buying property or considering an LRBA, speak with your Aspen advisor and specialist SMSF legal adviser before proceeding, particularly if the 10 August 2026 transitional deadline may be relevant.