Can Your SMSF Still Borrow to Buy Property? The 2026 Rules
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SMSF Property Rules · Business Real Property · SMSF Commercial Property
From 10 August 2026 a new SMSF loan can only be used to buy business real property: real property used wholly and exclusively in one or more businesses. That can include premises occupied by your own business or by another business. An ordinary residential investment property that does not meet that test is outside the new borrowing lane.
Quick Answer
Yes. From 10 August 2026, a new SMSF limited recourse borrowing arrangement can still buy real property, but that property must be business real property: land and buildings used wholly and exclusively in one or more businesses. An ordinary residential investment property that does not meet that test can no longer be financed under a new LRBA, although an SMSF may still buy one outright with fund money if the ordinary SMSF investment rules are satisfied.
Also called: SMSF commercial property loan, LRBA property loan, business real property loan, SMSF business premises loan.
What changed for SMSF property borrowing on 10 August 2026?
From 10 August 2026, a limited recourse borrowing arrangement used to purchase real property can only be used to acquire business real property. That is the whole of the change. A limited recourse borrowing arrangement, or LRBA, is the structure that lets a self-managed super fund borrow at all: the fund borrows, a separate holding trust, established under its own trust deed, holds the asset, and the lender's recourse is limited to that asset rather than to the rest of the fund.
The change came through the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, Act No. 49 of 2026, which received Royal Assent on 26 June 2026. Schedule 5 carries the limited recourse borrowing arrangement provisions and amends the Superannuation Industry (Supervision) Act 1993. The Australian Taxation Office published its guidance on the change on 28 July 2026 and confirmed the commencement date in its SMSF newsroom on 29 July 2026.
Two things did not change, and the ATO says so directly. How LRBAs operate is unchanged, and the other exceptions to the general prohibition on borrowing by self-managed super funds are unchanged. What moved is the class of real property a new arrangement is allowed to acquire.
The change lands on a large base. Over 653,000 SMSFs held more than $1 trillion in assets as at 31 December 2025, and around 17.5 per cent of those assets were held in residential and commercial property.
Source: Moneysmart (ASIC), SMSFs and property, attributing the ATO. As at 31 December 2025. Population figures for the sector as a whole, not an indication of any individual fund's position or of what any fund should hold.If you are also weighing what this means for borrowing in your own name rather than through the fund, what the change means for borrowing in your own name is a separate question with a separate answer.
| The question | What it actually means | Where it is answered |
|---|---|---|
| Can my SMSF borrow to buy a property? | The fund borrows under a limited recourse borrowing arrangement and the fund ends up owning the property | This page |
| Can I borrow money from my SMSF? | A member taking money out of their own fund, which is the opposite direction of travel | Not this page. That is an early access and preservation question for your SMSF accountant or adviser, not a lending one, and the answer is not the same |
| Can I buy property through my business? | A company or trust you control buys the property, outside superannuation entirely | Not this page. Holding property in a trust or company covers it |
| What are the other 2026 super changes? | Anything affecting contributions, the tax on fund earnings or member balances | Not this page. Your SMSF accountant |
A disambiguation, because three of these four questions return results for each other. General information only.
Is this a ban on SMSF property borrowing?
No, and the ATO answers it under that heading on its own page. The change has been widely described as a ban, and the word reached the search results and the AI summaries well before the guidance did, which is why most readers arrive holding it.
The stated position is that limited recourse borrowing arrangements are not banned. SMSFs can still borrow, or maintain a borrowing, under an LRBA to acquire an asset. What the changes do is restrict real property assets to business real property. Residential real property that meets the business real property definition can still be acquired and financed under an LRBA. Residential real property that does not can still be bought outright, provided the fund meets all the other regulatory rules, but it cannot be financed under one.
Can your SMSF still borrow to buy property?
Yes, with one condition attached, and the condition does all the work. A new limited recourse borrowing arrangement can still buy real property, but that property has to be business real property: land and buildings used wholly and exclusively in one or more businesses. Pass that test and the fund can borrow. Fail it and the fund can still buy the property, but only with money it already has.
The condition does not depend on who is lending. The ATO guidance is explicit that the changes apply where the arrangement is an LRBA regardless of whether the lender is a bank, a non-bank lender or a related party, and that the identity of the lender does not determine whether the real property must be business real property. That closes the workaround most readers reach for first, which is to route around the banks or to have a related entity lend to the fund. There is no lender-shaped exit from this test.
An ordinary residential investment property that does not meet the business real property test is the case that closed. For a fund entering a new arrangement, that property cannot be financed under an LRBA. The legal test is use, not the label on the building: a property built as a residence can still qualify where its actual use is wholly and exclusively in one or more businesses, while a normal residential rental investment usually will not. If a residential property does not meet the business real property definition, the fund can only acquire it without LRBA borrowing, subject to the ordinary SMSF investment rules.
Where the premises do pass, the facility itself behaves like commercial property lending rather than anything exotic, and it is worth a conversation before a contract is signed rather than after. You can talk through a commercial property facility, or read where this sits in a self-employed borrowing hierarchy if you are weighing this against buying in your own name or through a trust.
| Your situation | Can the fund borrow under an LRBA? | What governs it | Source |
|---|---|---|---|
| New purchase, ordinary residential investment property that does not meet the business real property test | No | New LRBA real property must be business real property | ATO QC107811 |
| New purchase, premises used wholly and exclusively in a business | Yes | Business real property test at entry and for the life of the loan | ATO QC107811 |
| LRBA already entered into before 10 August 2026 | Yes, and it can be refinanced | Existing arrangements unaffected | ATO QC107811, QC107830 |
| Binding contract exchanged before 10 August 2026 | Yes, even if it settles later | Contract exemption | ATO QC107811 |
| Any property, bought outright with no borrowing | Not applicable, no borrowing | Ordinary SMSF investment rules still apply | ATO QC107811 |
Read as at 3 September 2026 against ATO QC107811 and QC107830. General information about the rules, not advice about any particular fund or property.
What if residential property through the fund was the plan?
If the plan was an ordinary residential investment property that does not meet the business real property test, then the new borrowing route is closed and there are four things people do instead, none of which a broker should be choosing for you. A residentially constructed property that is genuinely used wholly and exclusively in a business is a different case and is dealt with under the business real property test above. Most coverage of this change stops at the word no, which is where the reader's actual problem starts.
The first is to buy the property outright, with money the fund already holds and no borrowing at all. The change restricts what a limited recourse borrowing arrangement can acquire; it does not stop a fund investing in residential real property that meets all the other regulatory rules. The constraint is simply that the fund needs the whole purchase price.
The second is to redirect the fund toward business real property, which is the lane that stayed open. For a self-employed reader that often means the premises the business already trades from, which is a different investment with a different risk profile, not a substitute for the one that closed.
The third is to buy outside super entirely, in your own name or through a trust, where ordinary lending rules apply and none of this is relevant. The fourth is to do nothing about it yet, leave the fund invested as it is, and revisit once lender appetite and the guidance have settled.
Should you set up an SMSF to buy property?
That is not a question a finance broker can answer for you, and it is a materially different question after 10 August 2026 than it was before. Setting up a fund is a licensed financial advice decision that turns on your balance, the cost of running the fund, your insurance, your other assets and your own circumstances. Nobody should be talking you into one, least of all somebody who would arrange the loan.
What has changed is the fact underneath the question. A geared residential investment inside super was the motivation behind a large share of fund set-ups, and on a new arrangement that strategy is no longer available on borrowed money. If instead the plan was always the premises your business operates from, the case is unchanged, because that is the property class the rules kept open. Those are two very different starting points that used to get the same answer.
Should the SMSF own the premises, or should you buy it personally, through a company or a trust?
There is no default winner. The SMSF question is not only about tax: it changes what you can borrow, what the lender can take security over, how readily equity can be accessed later, what can be done to the property under an LRBA and what happens if the business stops occupying it. Buying outside super can open ordinary commercial lending and broader equity-release options, but it creates a different tax, asset-protection, estate-planning and ownership position.
The practical rule is to choose the owning entity before the contract locks it in. Your accountant, licensed adviser and solicitor decide whether the SMSF, personal ownership, a company or a trust is appropriate; a broker can then compare the funding available to the structure you have chosen. If the decision lands outside super, how lenders treat property held in a trust or company is the adjacent lending question. This guide does not recommend an ownership structure.
What is business real property?
Business real property generally means land and buildings used wholly and exclusively in one or more businesses. That is the definition, and it is on the ATO's page in one line. The test that decides actual cases is the phrase sitting inside it.
By its nature the wholly and exclusively threshold is, in the Commissioner's own words, an onerous one to meet. It suggests an entire or complete use of the land for the purposes of one or more businesses. But the ruling does not apply it literally, and the sentence that does the work sits at paragraph 31 rather than in the definition:
"A minor, insignificant or trifling non-business use of the property can also be accommodated under the 'wholly and exclusively' threshold." ATO SMSFR 2009/1, paragraph 31. Read 3 September 2026.
That one sentence is the answer to the shop-with-a-flat-above question, and to every other question about a premises that is almost but not entirely business. It does not resolve those cases by itself, because the ruling does not quantify what counts as minor. What it does is establish that a premises with some incidental non-business use is not automatically outside the definition.
One boundary matters here and it is regularly stated wrongly. The 2 hectare allowance is not a general mixed-use carve-out. It is a special rule in subsection 66(6) of the Superannuation Industry (Supervision) Act 1993 and it deals with primary production businesses. Presenting it as a general allowance for any property with a residence attached is a material error, and it is one that circulates.
Property type is irrelevant to the definition. The rule does not ask whether a building is commercial or residential, it asks what the building is used for. Premises constructed as a house and used entirely as business premises can qualify. Premises constructed as a shop and lived in cannot. If you are weighing a specialised or unusual building, how a specialised security is assessed turns on the same underlying question of use.
Does your own business have to occupy the property?
No. The business using the property does not have to be your own. The statutory definition expressly tests whether the real property is used wholly and exclusively in one or more businesses, whether carried on by the entity or not. An SMSF can therefore own qualifying business premises leased to an unrelated business, provided the actual use of the property satisfies the business real property test.
If the tenant is your own company or another related party, the related party rules add another layer: the occupancy arrangement must be on arm's length terms and reflect market value. The key distinction is simple enough to keep: who runs the business does not decide business real property; what the property is actually used for does.
The test, and the two allowances inside it
The threshold
Wholly and exclusively used in one or more businesses
The property in its entirety must be used for the purposes of one or more businesses, to the exclusion of other uses. The Commissioner describes it as an onerous threshold, applied with a common sense rather than a literal reading.Source: ATO SMSFR 2009/1, paragraphs 27 to 30, and ATO QC42467. Ruling, read 3 September 2026. A statement of the test, not an assessment of any particular property.
The minor use allowance
Minor, insignificant or trifling non-business use
A non-business use of the property at that level can be accommodated under the threshold. It is not quantified as a percentage anywhere in the ruling, and whether a given use qualifies turns on the facts.Source: ATO SMSFR 2009/1, paragraph 31. Ruling, read 3 September 2026. No figure is stated because the ruling states none. Whether a use is minor is a question for your SMSF accountant or adviser.
The primary production rule
2 hectares, primary production land only
Where a primary production property contains a dwelling, the threshold is met if the area containing the dwelling and used primarily for domestic or private purposes does not exceed 2 hectares, and the domestic or private use is not the predominant use of the property.Source: ATO SMSFR 2009/1, paragraph 32, and subsection 66(6) of the Superannuation Industry (Supervision) Act 1993. Ruling, read 3 September 2026. This rule applies to primary production businesses. It is not a general mixed-use allowance for other property types.
Does your premises pass the test?
Your premises passes if the property, in its entirety, is used wholly and exclusively in one or more businesses, and fails if there is a non-business use of it that is more than minor, insignificant or trifling. Commercial zoning does not make a property business real property by itself; actual use is what decides the test. Start with the building, not the rule. A single-level unit in an industrial estate, roller door at the front, your own company's name on the signage, stock and a forklift inside and nothing else happening there: that passes, and it passes easily. Every hard case is a variation on how far a premises has moved away from that picture.
The table below sorts the common cases on the ATO's own reasoning and on the worked examples in SMSFR 2009/1. It is the starting point for a conversation with your SMSF accountant, not a substitute for having it.
| The premises | Business real property? | What decides it |
|---|---|---|
| A warehouse or industrial unit occupied by your own operating business | Passes | The business occupies the whole premises and nothing else happens there |
| A shop or showroom the business trades from, with no other use | Passes | The entire use of the property is the business |
| Premises built as a residence but used wholly for a practice, such as a doctor's surgery | Passes | Use decides and property type does not; the house was built as residential premises but is not used as such |
| Consulting suites or offices occupied entirely by the practice that owns them | Passes | The entire use of the property is the business |
| A primary production property with a dwelling on it | Passes within the subsection 66(6) limits | The dwelling area used primarily for domestic or private purposes does not exceed 2 hectares, and domestic use is not the predominant use |
| Leased commercial premises where the fund is landlord and an unrelated business is the tenant | Passes | The tenant's use of the premises is a business use |
| A typical residential investment property let to tenants, where the land is not itself used wholly and exclusively in a business | Fails | The property does not satisfy the business use test, so it is outside the new LRBA borrowing lane |
| Premises with a genuine non-business use that is more than minor | Fails | The paragraph 31 threshold accommodates only minor, insignificant or trifling non-business use |
| A dwelling with occasional or incidental business use | Fails | The business use is the small part, which is the test run in reverse |
| A property whose owner has abandoned plans to lease it to a business | Fails | Looking for a new tenant does not break it; abandoning plans to lease does |
| Any premises where the split between business and private use is genuinely arguable | Needs advice | Whether the non-business use is minor is a judgement on the actual use of an actual building, and it belongs to your SMSF accountant, adviser or auditor |
Sorted on ATO QC107811, ATO QC42467 and the worked examples in SMSFR 2009/1, all read 3 September 2026. General information about how the test is applied, not an assessment of any particular premises.
The published reasoning is easier to apply against a real building than a rule. a warehouse or industrial unit occupied by the owner's company, a consulting suite used entirely for the practice, and a manufacturer buying its own factory are all the same analysis run on different premises, and all three have their own pages here.
The BDO analysis of when residential property meets the business real property definition is worth reading if your building started life as a house. It works through a practitioner who owns residential premises used exclusively for her practice, and lands on the same point: the house was built as residential premises, it is not used as such, and the property is used wholly and exclusively in the business.
A shop on a main road. The owner's business trades from the ground floor, and above it there is a self-contained flat that somebody lives in. Does the property pass?
The question is not whether the building is commercial. It is whether the property, in its entirety, is used wholly and exclusively in one or more businesses. A flat above the shop is a non-business use, so everything turns on whether that use is minor, insignificant or trifling under paragraph 31 of SMSFR 2009/1, which is the operative threshold. That in turn depends on the facts: the floor area involved, whether the flat is genuinely occupied and by whom, whether it is let and on what terms, and what share of the whole property the residential use actually represents.
This page is not going to resolve it in either direction, because it cannot be resolved honestly from a description. A shop with a small upstairs storeroom that someone occasionally stays in is a different property from a shop with a full residential tenancy above it, and those two land on opposite sides of the same sentence. It is a call for your SMSF accountant or adviser on the actual use, and it is worth making before the fund signs anything.
Can your fund buy the premises your own business occupies?
Yes. Your fund can buy the premises your own business occupies, and it is allowed because business real property is carved out of two separate rules at once, which is what the entire strategy rests on. A fund generally cannot acquire an asset from a related party. A fund generally cannot hold more than a small proportion of its assets in things connected to related parties. Business real property is an exception to both.
The ATO puts it in a single sentence on its investment restrictions page: business real property generally means land and buildings used wholly and exclusively in a business, and it is an exception to the in-house asset and related party acquisition rules. Those two halves are usually explained separately, and the join between them is the whole point. Without the related party acquisition exception, your fund could not buy the building from you. Without the in-house asset exception, your fund could not then lease it back to your business. You need both, and business real property is the only thing that delivers both.
The exception is not unconditional. A fund can acquire an asset from a related party only where the price reflects market value and the asset falls into one of the permitted classes, with business real property among them. Market value and business real property are cumulative requirements. Neither one on its own gets the transaction across, which is why a favourable family price on a genuinely commercial building fails just as surely as a market price on a residential one.
In practice this is the same transaction as buying the premises from your landlord, run through the fund instead of through your company or your own name. If the premises are already yours, the comparison worth making is against an owner occupier purchase in the operating entity, and if the building is a practice, buying practice premises through the fund has its own funding pattern.
What lease does your fund have to give your business?
The legal core is arm's length terms and market value. The ATO also treats informal arrangements under which a related party uses or controls fund property as a lease arrangement, so the rule is wider than a document called a lease. In practice, document the occupancy, market rent and payment terms properly and follow them. A lender, solicitor or auditor may require a formal written lease, but that is different from saying the national SMSF rule only recognises a written lease.
This is also where the 5 per cent question gets its answer, and that is the question readers arrive with more than any other. A fund is restricted from holding in-house assets that comprise more than 5 per cent of the market value of its total assets. An in-house asset includes a loan to a related party, an investment in a related party, and an asset of the fund that is leased to a related party. On a plain reading, leasing the building to your own company would breach that limit the moment it happened, because the building is usually most of what the fund owns.
It does not, and here is the half that never appears next to the first half: business real property leased between your fund and a related party of your fund is an exception to the in-house asset rules. That is why the arrangement is lawful at all. The 5 per cent cap is real, it still applies to everything else the fund holds that is connected to a related party, and a compliant business real property lease simply is not caught by it.
What keeps the lease inside the exception is the terms. Any lease must be made on an arm's length basis and must reflect market value. And the consequence of getting that wrong sits directly against the requirement rather than in a footnote: if an asset is not acquired or sold at arm's length, all or part of any income from the transaction may be non-arm's length income and taxed at the highest marginal rate. A soft rent is not a small administrative untidiness.
What this page does is state the requirements and mark where they stop. It is not tax advice and it is not legal advice. The lease itself is a solicitor's job, the fund's compliance is a job for its accountant and auditor, and the market rent evidence is a valuer's. If the funding structure is the part you are working out, a lease doc facility is the closest commercial equivalent and holding commercial property as a passive investment covers the landlord side where the tenant is not your own business.
| Requirement | What it means in practice | What breaks it |
|---|---|---|
| Arm's length terms | The lease is on the terms an unrelated tenant would be given | Terms softened because the tenant is related |
| Market rent | Rent reflects market value and is reviewed | Rent set to suit the business rather than the market |
| Rent actually paid | The business pays what the lease says, when it says | Rent accrued, deferred or forgiven informally |
| Documented commercial terms | The occupancy, market rent and payment terms are evidenced and actually followed | Informal terms with no defensible evidence of market rent, or rent that is accrued, deferred or forgiven to suit the related business |
Arm's length and market value requirements drawn from ATO QC42467, with the wider meaning of a lease arrangement checked against ATO SMSFR 2009/4. Read 3 September 2026. A formal written lease may still be required by the lender, solicitor, auditor or applicable state law. General information only and not tax or legal advice.
What are NALI and NALE, and how do they apply to the lease?
NALI is non-arm's length income and NALE is non-arm's length expenditure. They are the two acronyms your accountant and your auditor will use about this lease, and they are worth knowing because they are the mechanism that makes a soft rent expensive rather than merely untidy.
The income limb is the one stated on the ATO's own investment restrictions page and it is the one this page can be specific about: if an asset is not acquired or sold at arm's length, all or part of any income from the transaction may be non-arm's length income and taxed at the highest marginal rate. Rent charged below market on a property your fund leases to your own business is exactly the kind of arrangement that provision is aimed at, which is why the market rent requirement is not administrative.
The expenditure limb turns on what the fund pays, or does not pay, rather than what it receives. ATO Law Companion Ruling LCR 2021/2 deals with non-arm's length expenditure where a fund incurs less expenditure than would be expected on arm's length terms, or incurs none at all. How that applies to a particular lease, maintenance, management or related-party service is a technical tax question and this page does not attempt to decide it. Raise both acronyms by name with your SMSF accountant before the occupancy terms are settled.
Can you sell a premises you already own into your fund?
Yes, subject to two conditions that both have to hold: the price reflects market value, and the asset is business real property. Those two are the whole of the acquisition test for a related party transfer of this kind, and the ATO lists them together for a reason.
Both, not either. A market value price on a property that is not business real property does not qualify the transaction, and a genuine business real property that changes hands at a friendly price does not either. The valuation carries as much weight as the use, which surprises owners who assume that because the building obviously qualifies, the number is a formality.
The price is not only an entry condition. If an asset is not acquired or sold at arm's length, all or part of any income from the transaction may be non-arm's length income and taxed at the highest marginal rate. So the valuation that gets the transfer through is also the valuation that protects the fund's tax position for as long as it holds the property. It is worth having, and worth keeping.
If the aim is to release capital from a building your business occupies, a sale and leaseback is the comparison worth running alongside this one, and holding property in a trust or company changes the analysis again.
A business owner personally owns the unit their company trades from, and wants it inside the fund.
The sequence runs like this. First, the business real property test on the actual use of the premises, because if it fails there is no transaction to structure. Second, market value, established properly rather than assumed, because it is both an acquisition condition and the fund's protection against a non-arm's length income finding later. Third, the lease from the fund back to the company, on arm's length terms at that market rent, in place rather than intended. Fourth, the advice the transaction actually needs: a solicitor on the transfer and the duty position, the accountant on capital gains and on the fund's compliance, and the auditor's expectations understood before rather than after.
Notice what the sequence does not end with. It does not end with an outcome, because the outcome depends on facts this page does not have. It ends with the order the work has to happen in, and that order is the part owners most often get wrong.
What does it cost to move your premises into the fund?
Three tax questions can sit on top of the price, and no single body decides them: transfer duty, which is administered under the law of the state or territory where the property sits; capital gains tax on the seller's disposal, which is governed by Commonwealth tax law; and the goods and services tax treatment of the sale, including whether it can qualify as the supply of a going concern. They do not necessarily all produce a tax bill, and each turns on different facts, which is why there is no honest single national cost figure.
This page does not print duty rates or thresholds, and it does not tell you whether a concession applies to your transfer. Both of those turn on your state and on the facts, and a wrong number here would cost more than no number. What it does is name who decides what, so that you ask the right person first and do not discover the third cost after committing to the first two.
| The cost | Who decides it | What it turns on | Who to ask |
|---|---|---|---|
| Transfer duty, often called stamp duty | The revenue authority of the state or territory the property sits in | The state, the value of the property, and whether any concession for a transfer to a superannuation fund applies on your facts | A solicitor or conveyancer in that state |
| Capital gains tax on the seller's disposal | Commonwealth tax law, administered by the Australian Taxation Office | Who the seller is, how long the property was held, how it was used, and whether any concession is available on the actual facts | Your accountant, before the transfer rather than at tax time |
| Goods and services tax on the sale | Commonwealth tax law, administered by the Australian Taxation Office | Registration, the nature of the supply, and whether the sale qualifies as the supply of a going concern | Your accountant and solicitor. If going-concern treatment may apply, settle the position before exchange so the contract records it correctly; the ATO requires written agreement on or before the day of supply |
| Market valuation | A valuer, and in practice the fund's auditor tests it afterwards | The property, and the requirement that a related party acquisition reflects market value | A valuer, engaged before the price is agreed rather than to justify one already agreed |
A map of who decides what, as at 3 September 2026. No rate, threshold, concession or exemption is stated on this page, because each of them turns on the state and on the facts of the transaction. General information only and not tax or legal advice.
The ordering point is worth making on its own. If GST-free going-concern treatment may be relevant, decide it with the accountant and solicitor before exchange so the contract records the intended treatment cleanly. The legal timing rule is slightly wider than that practical advice: ATO GSTR 2002/5 says the supplier and recipient must agree in writing that the supply is of a going concern on or before the day of supply. Transfer duty then follows the rules of the state or territory where the property sits, while any capital gain is dealt with under the seller's Commonwealth tax position. The expensive mistake is discovering one of those questions only after the contract has locked the transaction in.
If the transfer is being considered as a way to release capital rather than as an end in itself, a sale and leaseback reaches a similar outcome by a different route and carries a different cost profile, which is worth pricing alongside this one before either is committed to.
Does the property have to stay business real property for the whole life of the loan?
Yes. The asset must be business real property when the arrangement is entered into, and it must continue to be business real property for the entire life of the arrangement, so the test applies at two moments rather than one. The second is the one almost nothing published on this change deals with.
That makes it a continuing condition rather than a purchase condition, and the distinction changes what the rule is for. Most coverage treats business real property as a hurdle cleared at settlement, after which the fund owns a building and gets on with it. The ATO does not describe it that way. The property has to be wholly and exclusively used in one or more businesses for the duration of the loan, which can be fifteen or twenty years of tenancy decisions.
Trace the mechanism rather than the alarm. A property stops being business real property. The fund thereby fails to maintain the arrangement according to the rules. Failing to maintain it means the fund has breached the law against borrowing, and compliance action may apply. Nothing in that chain requires anyone to have done something reckless; it can run entirely on a change of use that seemed like a leasing decision at the time.
The practical consequence is that a choice made years into a loan, about who occupies the building and what they do inside it, is a decision about the fund's compliance and not only about its rent. It is worth knowing that before the fund signs a tenant who wants to convert part of the space, and worth understanding how the valuation is instructed and how freehold against leasehold compares, since both bear on what the property is and how it is assessed over time.
When the test applies, and what happens if it stops being met
At entry
Business real property when the LRBA is entered into
From 10 August 2026 the real property asset must be business real property at the time the arrangement is entered into. That is, the asset must be wholly and exclusively used in one or more businesses at the time of the LRBA. If it does not meet this rule, the fund has breached the law against borrowing and compliance action may apply.Source: ATO QC107811, Changes to limited recourse borrowing arrangements. Published 28 July 2026, read 3 September 2026. A statement of the rule, not an assessment of any fund.
For the entire life of the loan
And it must stay business real property throughout
The real property asset must continue to be business real property for the entire life of the LRBA, meaning wholly and exclusively used in one or more businesses for the duration. If the asset stops meeting this during the arrangement, the fund fails to maintain the LRBA according to the rules and has breached the law against borrowing.Source: ATO QC107811. Published 28 July 2026, read 3 September 2026. This is the continuing limb and it is the one least covered elsewhere.
If the test is failed
Penalties, non-complying status, disqualification, prosecution
The actions available where a fund does not comply with the investment restrictions include imposing penalties, making the fund non-complying, disqualifying trustees, and prosecution of trustees. Which of them applies, if any, depends on the circumstances and is a matter for the regulator.Source: ATO QC42467, What are the SMSF investment restrictions? Last updated 16 September 2025, read 3 September 2026. A list of available actions, not a prediction of outcome in any case.
What if the tenant leaves or the business closes?
A vacancy on its own does not break it. The ATO's framing here is precise and the distinction is the single most useful sentence on this page for anyone whose tenant has just given notice: if the property is land on which commercial premises are leased, the property will not stop being business real property only because the owner is looking for a new tenant. However, if the owner abandons plans to lease the property, the property will no longer be business real property.
So the line is drawn at intention, not at occupancy. A trustee actively marketing empty premises is in a different position from a trustee who has given up on leasing them, and the difference between those two states is mostly evidence. Keep the agency instructions, the listings and the correspondence while the search is happening, rather than reconstructing the story afterwards for an auditor who has only the vacancy to look at. If the tenancy itself is what a lender is assessing, a going concern valuation explains how that is approached.
What happens to loans and contracts already in place?
Nothing changes for them. If the fund entered into its arrangement before 10 August 2026, or exchanged a binding contract before that date, the change does not reach the transaction at all, and the asset does not have to be business real property. The date you signed decides this section.
Do you have to sell a property your fund already owns?
No. Nothing in this change requires a fund to sell a property it already holds, and nothing requires an existing arrangement to be unwound or brought into line with the new rule. An arrangement entered into before 10 August 2026 is unaffected and can be maintained, and the asset does not have to become business real property because the rule changed around it.
That is worth stating plainly, because the change reached most people through the word ban, and a ban is the kind of thing that sounds like it applies to what you already own. It does not. The restriction operates on what a new arrangement is allowed to acquire.
What can still force a decision on a fund holding a pre-change residential property is everything that could have forced one before: the loan's own terms, a fixed rate ending, a vacancy, or the fund's ability to keep meeting repayments out of contributions and rent. Those are trustee questions for your accountant and adviser, and they were live before 10 August 2026 as well.
Existing arrangements are unaffected, and so is refinancing them. Here is the commercially important part, which very little on the subject states plainly: a new lender is permitted. The ATO defines refinancing an LRBA as entering into a new loan contract for the same asset, with the same or a new lender. A fund holding a pre-change residential arrangement is therefore not captive to its current lender because of the rules. It can refinance, and it can refinance somewhere else. The binding constraint is the asset, not the lender: it has to be the same asset.
Binding contracts exchanged before 10 August 2026 are protected too, even where the contract settles or the arrangement is entered into after that date. The ATO's own example runs an off-the-plan contract exchanged before the date, finance approved after it and settlement a year later, and confirms the change does not apply.
On variations, the wording is narrow and it is worth staying inside it rather than reasoning past it. In general, later variations of the contract will not change the position. However, if a contract is changed significantly and the fundamental terms no longer exist, it may be considered that a new arrangement has begun. That is the entirety of the stated position, and there is no safe extrapolation available from it, which is a reason to take any material variation to an adviser before it is signed rather than after.
Can you top up, release equity or change the security when you refinance?
Do not assume you can. A straight refinance of a pre-10-August borrowing is protected, including a refinance with a new lender, but Schedule 5 protects a later arrangement only to the extent that it maintains or refinances the earlier borrowing. The ATO describes refinancing as a new loan contract for the same asset with the same lender or a new lender. Neither statement is a blanket permission for extra debt, cash out or a replacement asset.
The legislation and current ATO guidance do not publish a bright-line rule that turns every increased refinance, consolidation or security change into a yes or no answer. That makes these boundary cases a legal and SMSF-advice question before they are a lending question. Lender policy can be narrower again than the rules: some current SMSF products state that cash out is not available at all, even where the same product offers refinancing. That is a product-policy limit rather than a limit the legislation imposes, and it is worth confirming lender by lender rather than assuming.
| What you want to do | What can be said safely | What to check before committing |
|---|---|---|
| Refinance the existing borrowing over the same asset | This is the clearest protected refinance case, and the lender can be the same or a new lender | The new lender's appetite, servicing and security policy |
| Increase the loan, top up or take cash out | Do not assume the extra amount is protected merely because the transaction is called a refinance | SMSF legal and tax advice on the protected extent, plus lender policy. Some lenders do not allow cash out |
| Release equity for another purpose | This goes beyond the simple same-asset refinance question | Whether the proposed borrowing remains within the grandfathering and LRBA rules, and whether the lender permits the purpose |
| Replace the property or change to a different security asset | The ATO's refinance description is tied to the same asset, so a replacement asset should not be assumed to be an ordinary protected refinance | Whether a new acquisition or arrangement is being created and, if real property is involved, whether the business real property rule applies |
| Borrow extra for renovations or improvements | Separate LRBA restrictions apply to what borrowed money can fund; borrowed funds can maintain or repair but cannot improve the asset | Section 67A and SMSFR 2012/1, plus lender policy |
The Act uses the words "to the extent that" an arrangement maintains or refinances the earlier borrowing. This table deliberately does not turn that phrase into a universal cash-out rule. General information only; obtain SMSF legal and tax advice for a proposed variation or increased refinance.
If the refinance is the live question, it runs as a commercial property refinance conversation rather than an SMSF-specific one, and how commercial property lending is priced is the context for what the new facility is likely to look like.
| Your situation | Treatment | What to watch |
|---|---|---|
| LRBA entered into before 10 August 2026 | Unaffected, and it can be maintained | The arrangement's own terms still apply |
| Refinancing that existing LRBA | Permitted, with the same lender or a new one | It must be the same asset |
| Binding contract exchanged before 10 August 2026 | Unaffected, even if it settles later or the LRBA comes later | A significant change to fundamental terms may start a new arrangement |
| New arrangement entered into on or after 10 August 2026 | Business real property only | The test applies at entry and for the life of the loan |
Read as at 3 September 2026 against ATO QC107811 (published 28 July 2026) and QC107830 (last updated 29 July 2026). General information about the transitional position, not advice on any particular arrangement.
What if no lender will refinance a pre-change residential arrangement?
Permitted and available are not the same thing, and the gap between them is a market question rather than a rules question. The rules allow the refinance: a new loan contract for the same asset, with the same lender or a new one. Whether any particular lender will write it is that lender's own policy, and the industry association's guidance after the change took effect was that requirements and appetite may differ between lenders and should be monitored lender by lender.
If the search comes back empty, staying on the existing facility is a legitimate outcome and not a compliance problem. The arrangement remains an arrangement entered into before the change, and it is unaffected whether or not it is ever refinanced. Refinancing is an option the rules preserve, not something the fund is required to do.
The conversation worth having first is with the existing lender about the facility already in place, because a variation to the terms of an existing loan is a different transaction from a refinance and may be available where a refinance is not. If the pressure is really the fund's capacity to carry the repayments rather than the rate, that is a trustee decision with your accountant and adviser, not a lending one, and no amount of shopping the loan around will answer it.
What do lenders require for an SMSF commercial property loan in 2026?
Most lenders assess four things at once: the property and valuation, the fund's cash position, servicing from rent and contributions, and the LRBA documents and guarantees. There is no ATO, ASIC/Moneysmart or MFAA rule setting one universal LVR, deposit percentage or minimum SMSF balance. Those numbers come from lender policy, and current lender policies differ materially.
That distinction matters because a property can be legally eligible business real property and still fail credit. The lender still has to accept the security, value it at a level that supports the loan, be satisfied that the fund can meet repayments and its other obligations, and be comfortable that the holding trust, trustee, occupancy and guarantee documents fit its policy.
| Credit question | What the lender looks at | What can make an otherwise compliant deal fail |
|---|---|---|
| Property and valuation | Property type, location, valuation, marketability, occupancy and whether the security fits the lender's SMSF commercial policy | A low valuation, specialised or unacceptable security, weak marketability, vacancy or a postcode/property type outside policy |
| Deposit and cash to complete | The fund's contribution to the purchase, transaction costs and any liquidity position required by that lender | The accepted valuation creates a larger cash gap than expected, or the fund cannot meet the purchase and costs while satisfying the lender's policy |
| Servicing | Rent, member contributions, other fund income and expenses, tested under that lender's servicing method | Insufficient assessed income, rent shading, weak coverage or a contribution assumption the lender will not accept |
| Self-employed evidence | Personal tax evidence and, where relevant to servicing, company or trust financial information and business trading history | The income needed to support contributions or guarantees cannot be evidenced under the lender's documentation policy |
| Lease and occupancy | Tenant, rent, lease or occupancy evidence, lease term and whether a related-party arrangement is commercial and at market value | No acceptable occupancy evidence, rent that does not support servicing, or related-party terms the lender or adviser cannot defend |
| LRBA and guarantees | SMSF deed, holding trust deed, trustee details, purchaser/title structure, member guarantees and any independent legal advice its policy requires | The wrong entity, deed or execution sequence, unacceptable trustee structure, missing guarantees or documents that do not match the transaction |
Lender policy sits on top of the SMSF rules. Passing the business real property test answers whether the new LRBA can acquire the property; it does not answer whether a lender will approve it.
How much cash does the SMSF actually need to complete the purchase?
Start with the lender's accepted valuation, not just the contract price. In simplified form: maximum loan is constrained by the lender's LVR applied to its accepted value; cash to complete is the purchase price minus the loan, plus duty, legal, valuation, holding-trust and other transaction costs, plus any liquidity the fund or lender needs to retain. The actual lender calculation can be more restrictive because servicing, property type and policy still apply.
A fund agrees to buy qualifying business premises for $1 million. Assume only for illustration that the lender's applicable ceiling for that exact file is 75% and the accepted valuation equals the $1 million price. The loan ceiling from value is $750,000, so the fund needs at least $250,000 toward the price, plus transaction costs and whatever post-settlement cash position the fund and lender require.
If the lender values the same property at $950,000, 75% of the accepted value is $712,500. The price gap becomes $287,500 before duty and other costs. Nothing in that example says 75% is a typical SMSF LVR; it shows why the customer's real question is cash to complete after valuation and policy, not "what is the SMSF deposit?" in isolation.
Once the SMSF structure is right, ordinary commercial credit questions still matter. How a commercial property loan works covers the underlying mechanics, and the commercial property deposit guide explains how lender ceilings create the cash-to-complete gap. Read those pages as lender context, not as a promise of the percentage an LRBA will receive.
Appetite is moving, and it is not moving uniformly. The MFAA's guidance after the rule change says lending requirements and appetite may differ between lenders and that brokers should monitor individual lender policy on SMSF lending and refinancing. That is why this page separates the legal rule from dated product evidence.
If you want to test the transaction rather than a generic percentage, the lending conversation is about commercial property finance: the exact property, accepted valuation, fund cash, servicing and structure together.
What should be settled before you sign a property contract?
Settle the structure before the fund is committed. At minimum, confirm whether the actual property use passes the business real property test, have the SMSF solicitor or conveyancer tell you which entity must be named as purchaser and how the holding trust documents are sequenced in your state, and work out whether the fund still has a workable cash position after the deposit and transaction costs. Do not use the contract as the place to discover any of those answers.
The exact purchaser name and deed timing are state-specific, so this guide deliberately does not print a national signing formula. If the seller is related to you, establish market value before the transfer price is treated as settled. If GST-free going-concern treatment may be relevant, settle that with the accountant and solicitor before exchange so the contract can record the intended treatment. Once those pieces are known, the broker can test lender appetite against the transaction that actually exists rather than a hypothetical one.
Can the LRBA pay for renovations, fit-out or improvements?
Not for improvements. Section 67A allows LRBA borrowings to be applied to acquiring the single asset and to expenses connected with the borrowing or acquisition, including examples such as conveyancing, stamp duty, brokerage and loan establishment costs. Borrowed money can also be used for maintaining or repairing the asset, but not for improving it. Whether a lender will actually advance every permitted cost is a separate lender-policy question.
The ATO's SMSFR 2012/1 adds the second boundary: money from other sources can be used to improve the asset, but the improvement must not change the single acquirable asset into a different asset. That matters if the purchase only works after substantial conversion, redevelopment or a major fit-out. Treat the property acquisition and the works as two questions before you sign, not one budget after settlement. If the business needs separate funding for the works, fit-out finance is the adjacent funding concept, but the SMSF adviser and solicitor still need to decide what the fund itself can lawfully do.
Who do you need to talk to, and in what order?
Your SMSF accountant or adviser first, and a broker fourth. That order is not modesty, it is the sequence that stops money and time being spent on a transaction that was never going to work. Almost every one of these files that falls over does so because the order was reversed and the contract was signed before anyone confirmed the premises qualified.
| Who | What they decide | When |
|---|---|---|
| Your SMSF accountant or adviser | Whether the premises is business real property on its actual use, and whether the fund should hold it at all given what else it owns | First, and in writing, before anything is signed |
| A solicitor | The contract, the holding trust deed, the order the deeds are executed in relative to the contract, and the stamp duty position in your state | Before exchange, and before the holding trust is established |
| A valuer | Market value where the fund is buying from a related party, and the market rent the lease has to reflect | Before the transfer price and the lease terms are set |
| A finance broker | What the lending looks like, where the appetite currently sits, and how the facility is structured around the fund and the holding trust | Once the premises passes and the structure is settled |
| The fund's auditor | Nothing at the time, but their expectations are what the whole file gets built for | Understood before settlement rather than discovered after |
The order of the work, drawn from the requirements set out on this page. General information only. Nothing here is tax or legal advice, and the roles above are not interchangeable.
An owner whose company trades from a leased industrial unit wants the fund to buy it. The landlord is willing to sell.
The sequence, in order. Does the premises pass the business real property test on its actual use, established before anything is signed rather than assumed from the zoning. Who owns it now, because a purchase from an unrelated vendor and a purchase from the owner personally run under different rules and only one of them needs the related party exception. What the fund will actually hold, which is a beneficial interest, with the holding trust on title and the deeds executed in the right order. What the lease from the fund to the company will say, at market rent on arm's length terms, in place at settlement. And only then, what a lender will assess, which is the fund, the lease, the members and the property as one file.
What the sequence ends in is a decision, not an approval. The decision is whether the fund should hold this building at all, given what else it owns, what it will need to pay and what happens to it if the company stops trading. That belongs to the trustees with their accountant and adviser. The order of the work matters more than the speed of it.
From our broking, indicative
These are the patterns we are seeing on SMSF business real property enquiries since the change took effect. They are qualitative because no single published percentage represents the whole market. Individual lenders do publish current product settings on their own pages, and those settings differ materially from each other, which is exactly why a single generic figure would mislead.
- Do not assume a generic commercial LVR carries across to an SMSF file. The applicable ceiling can move with lender, property type, postcode, valuation, servicing and documentation, and current direct lender pages show materially different policy settings.
- Post-settlement liquidity still matters to the fund's overall position, but lender treatment is not uniform. Some current products expressly publish no liquidity or net-asset test; other credit policies and advisers may still focus closely on what remains after settlement. Ask which requirement is law, fund strategy and which is simply that lender's policy.
- Timeframes are often set by the holding-trust, purchaser and occupancy documents as much as by the credit decision. Where those documents are drafted and executed in the correct state-specific order relative to the contract, the lender can assess the file that actually exists. Where the sequence is wrong, fixing it can become the delay.
- What gets these files into trouble, in the order we actually see it. First, the premises do not pass the business real property test and nobody checked before the contract was signed. Second, the holding-trust or purchaser structure was established in the wrong order for the transaction, or with the wrong party on title. Third, the lease or occupancy evidence is missing or the related-party terms cannot be defended as arm's length. Fourth, the fund or the assessed rent cannot carry the lender's servicing test. Fifth, the rent has been set to suit the business rather than the market, which is a compliance issue before it is a credit one.
Indicative only, based on files we have placed and enquiries we are currently handling, as at 3 September 2026. The direct-lender figures above are examples of specific published policies, not a market-wide band or a statement of approval likelihood. This is not a quote or an offer. Actual terms depend on lender policy, property, valuation, servicing, documentation and your circumstances at the time of application. General information only, and not financial, tax or legal advice.
An SMSF can still borrow to buy property. From 10 August 2026 a new limited recourse borrowing arrangement can only acquire business real property, meaning land and buildings used wholly and exclusively in one or more businesses, and that restriction applies whatever kind of lender is involved. Arrangements entered into before that date are unaffected, binding contracts exchanged before it are unaffected, and an existing arrangement can still be refinanced with the same lender or a new one. The part most easily missed is that the test does not stop at settlement.
Key takeaway: the question is no longer what you are buying, it is what the building is used for, on the day the fund borrows and every day after.Frequently asked questions
Yes, provided the commercial property is business real property. From 10 August 2026 a new limited recourse borrowing arrangement can only be used to acquire real property that is business real property, meaning land and buildings used wholly and exclusively in one or more businesses. Most genuine commercial premises occupied by a trading business meet that description, which is why the commercial lane is the one that stayed open. The condition applies whether the lender is a bank, a non-bank lender or a related party.
Yes. An SMSF can buy commercial property outright subject to the ordinary SMSF investment rules. If the fund uses a new limited recourse borrowing arrangement, the real property must be business real property when the arrangement is entered into and must remain so for the life of the arrangement. The 2026 change restricted what a new LRBA can acquire; it did not ban commercial property investment itself.
A fund's in-house assets must not exceed 5 per cent of the market value of its total assets. An in-house asset includes a loan to a related party, an investment in a related party, and an asset of the fund that is leased to a related party.
The half that usually goes unsaid is the exception. Business real property leased between the fund and a related party of the fund is excluded from the in-house asset rules. That is why a fund can own the building your business trades from and lease it back without breaching the cap, and it is also why the premises have to be genuine business real property and the lease has to be on arm's length terms.
Yes, if two conditions both hold: the price reflects market value, and the asset is business real property. A fund cannot generally acquire an asset from a related party, and business real property is one of the listed exceptions to that rule, but the market value condition sits alongside it rather than instead of it. Both are required, not either. Stamp duty and capital gains treatment on the transfer turn on your state and on the facts of the transaction, and those are questions for a solicitor and your accountant.
No. The ATO states under its own heading that limited recourse borrowing arrangements are not banned, and that SMSFs can still borrow or maintain a borrowing under an LRBA to acquire an asset. What changed is that a new arrangement can only acquire real property that is business real property. A fund can still purchase residential property outright provided it meets all the other regulatory rules. If a residential property itself meets the business real property definition it may still be financed; an ordinary residential investment property that does not meet that definition cannot be financed under a new LRBA.
The change that affects property borrowing is that limited recourse borrowing arrangements entered into on or after 10 August 2026 to purchase real property can only be used to acquire business real property. It came through the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, Act No. 49 of 2026, which received Royal Assent on 26 June 2026, with Schedule 5 amending the Superannuation Industry (Supervision) Act 1993. The ATO has confirmed that how LRBAs otherwise operate is unchanged, as are the other exceptions to the general prohibition on borrowing by self-managed super funds.
Yes, when it is used wholly and exclusively in one or more businesses. The definition does not ask whether a property is residential or commercial, it asks what the property is used for. Premises built as a house but used entirely as a medical practice, a consulting suite or an office can qualify, and the ATO confirms that residential real property meeting the definition can be acquired and financed under an LRBA. It has to meet the definition at the time the arrangement is entered into and throughout the life of the arrangement.
There is no fixed answer, and this page deliberately does not give you one percentage. What a fund can borrow under a limited recourse borrowing arrangement is set by the lender's own policy applied to the fund's assets, its liquidity, the rent supporting the repayments and the property itself.
We found no current ATO, ASIC/Moneysmart or MFAA rule setting a universal post-10-August LVR, deposit or minimum fund balance for a business real property LRBA. Those are lender-policy settings, and lender requirements and appetite can differ. Check any figure against the lender, the property, the fund's liquidity after settlement and the date the policy was current.
Land and buildings used wholly and exclusively in one or more businesses. The wholly and exclusively threshold is an onerous one, but it is not applied literally: SMSFR 2009/1 states at paragraph 31 that a minor, insignificant or trifling non-business use of the property can also be accommodated under the threshold.
Separately, subsection 66(6) of the Superannuation Industry (Supervision) Act 1993 allows a primary production property containing a dwelling to qualify where the area containing the dwelling and used primarily for domestic or private purposes does not exceed 2 hectares and the domestic or private use is not the predominant use of the property. That primary production rule is not a general mixed-use allowance and should not be read as one.
If you exchanged a binding contract to acquire real property before 10 August 2026, the change does not apply to that acquisition, even if the contract settles or the limited recourse borrowing arrangement is entered into afterwards. The ATO's position on later changes to the contract is narrow: in general, later variations will not change this, but if a contract is changed significantly and the fundamental terms no longer exist, it may be considered that a new arrangement has begun. If you are contemplating a material variation to a pre-change contract, that is the sentence to put in front of your adviser before you sign anything.
No. Nothing in this change requires a fund to sell a property it already holds, and nothing requires an existing arrangement to be unwound or brought into line with the new rule. An arrangement entered into before 10 August 2026 is unaffected and can be maintained, and the asset does not have to become business real property because the rule changed around it. The restriction operates on what a new arrangement is allowed to acquire.
What can still force a decision is everything that could have forced one before: the loan's own terms, a fixed rate ending, a vacancy, or the fund's ability to keep meeting repayments. Those are trustee questions for your accountant and adviser.
Yes, the rules permit it, but permitted and available are not the same thing. The ATO defines refinancing a limited recourse borrowing arrangement as entering into a new loan contract for the same asset, with the same lender or a new one, and a pre-change arrangement can be refinanced on that basis.
Whether any particular lender will write it is that lender's own policy, and the industry association's guidance after the change took effect was that requirements and appetite may differ between lenders and should be monitored lender by lender. If nothing is available, staying on the existing facility is a legitimate outcome and not a compliance problem, because refinancing is an option the rules preserve rather than something the fund is required to do.
There is no single statutory deposit figure. We found no current ATO, ASIC/Moneysmart or MFAA rule setting a universal post-10-August deposit, LVR or minimum fund balance for a business real property LRBA. Those are lender-policy settings, not limits created by the SMSF borrowing legislation.
Published lender and broker figures vary and can go stale quickly. What the fund must contribute depends on the lender's policy, the property, the fund's assets and liquidity after settlement, and the rent supporting repayments. Check any percentage against its source and the date the policy was current.
Best is an advice question that depends on your fund and your circumstances, and a finance broker cannot answer it for you. What changed on 10 August 2026 is the range of choices, not the criteria.
A new limited recourse borrowing arrangement can only acquire real property that is business real property, so if borrowing is part of the plan the property has to be land and buildings used wholly and exclusively in one or more businesses. For a self-employed owner, one common case is the premises the business already operates from, but the business using the property does not have to be your own. A fund can still buy residential property outright with money it already holds, subject to the other regulatory rules; if the property does not meet the business real property test, it cannot be financed under a new LRBA. Which property or structure suits your fund is a question for your SMSF accountant or a licensed adviser.
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