SMSF Property: A Major Rule Change Has Just Arrived

If you have a self-managed super fund and have been considering using it to buy a residential investment property, one of the most significant changes in the history of SMSF investing has just happened.

On 23 June 2026, the Federal Government confirmed it had reached an agreement with the Australian Greens to ban SMSFs from borrowing to purchase residential property. The legislation is progressing through parliament and the ban is expected to take effect in mid-to-late August 2026.

This is breaking news that directly affects anyone who has been considering this strategy, or who already holds residential property inside their SMSF.

What Is and Is Not Affected

The distinction between what the ban covers and what it does not is important:

• New residential LRBAs are banned once the legislation takes effect – no new borrowing to purchase residential investment property inside an SMSF
• Existing residential LRBAs are fully grandfathered – if your SMSF already holds a residential property under an LRBA, nothing changes and you are not required to sell or refinance
• Commercial property LRBAs are completely unaffected – SMSFs can still borrow to purchase business premises, commercial properties, industrial properties and similar assets
• The SMSF structure itself remains fully intact – the fund continues to operate, invest, and benefit from concessional tax treatment

A Small but Significant Window Remains

Because the ban is triggered by the legislation receiving royal assent, which is expected but has not yet occurred, there is a narrow window remaining. The relevant date is the contract date, not the settlement date. If you have been seriously considering purchasing residential property inside your SMSF using an LRBA, signing a contract before the legislation passes provides protection.

However, this window is measured in weeks, not months. Lenders have already begun withdrawing SMSF residential loan products, and the process of establishing an SMSF, setting up the required bare trust, obtaining loan approval, and executing a contract takes meaningful time. Anyone considering this route needs to act immediately and seek specialist advice.

What If You Already Have SMSF Property?

If your SMSF already holds residential property under an existing LRBA, your arrangement continues without disruption. However, there is one important caution: if you are considering refinancing your existing SMSF loan to a lower rate, get specific advice before proceeding. The ATO has not yet clarified whether a refinance in all circumstances would be treated as a ‘new’ LRBA. Until that guidance is issued, proceeding without advice carries risk.

There is also an important action item for all SMSF property holders right now: an annual independent property valuation is required for your fund’s financial statements, and with the new cost base reset election available before 30 June 2026 for Division 296 purposes, getting a current valuation has added significance this year.

If your SMSF is not being actively reviewed and managed with professional support, now is a good time to ensure it is.

The SMSF residential property ban is the most significant change to SMSF investing in years. Whether you are thinking about this strategy, already hold SMSF property, or simply want to understand how these changes affect your retirement planning, Simmons Livingstone can help. Call 1800 618 800 or email admin@simmonslivingstone.com.au.