From 10 August 2026, self-managed super funds can no longer enter new limited recourse borrowing arrangements (LRBAs) to buy residential property. If your SMSF is weighing a property purchase against exchange traded funds (ETFs), that decision now has a hard deadline attached to it, not an open timeframe. Several lenders have already repriced their SMSF products in the run-up to the change, and trustees who wait too long may find the residential option has closed.
What Actually Changed on 10 August 2026
An LRBA is the structure an SMSF has used to borrow money to buy a single asset, most commonly property, while keeping the lender’s recourse limited to that asset if the loan defaults. From 10 August 2026, new LRBAs for residential property are no longer permitted. Contracts generally needed to exchange by 9 August 2026 for a residential purchase to proceed under the old rules.
This is a regulatory change, not a lender decision, so it applies across the market rather than to individual banks. Existing residential SMSF loans that have already settled are grandfathered. They continue on their current terms, and trustees are not required to sell or refinance because of the ban.
Can an SMSF still borrow to buy commercial property?
Yes. The ban applies specifically to residential property. LRBAs for commercial and industrial property remain available, and several lenders have shifted their SMSF focus in that direction. AFG launched commercial and SMSF white label loans with Pepper Money ahead of the deadline, and Pepper Money separately expanded its white label SMSF and commercial lending through other broker networks.
Why SMSF Trustees Are Stuck Between Property and ETFs
Property through an SMSF loan has traditionally appealed to trustees who wanted direct, geared exposure to real estate inside their fund. Borrowing amplified the growth potential, at the cost of liquidity and higher compliance overhead. ETFs offer diversification and low ongoing cost, but without a lender in the mix there is no gearing to accelerate returns.
With new residential LRBAs off the table, that comparison shifts. A trustee who still wants geared property exposure through their fund now has to look at commercial or industrial assets, which behave differently in terms of tenant risk, vacancy periods, and lease structure than a residential property would have.
There is also a concentration question that often gets overlooked in this comparison. A single residential property can end up representing 60% or more of a smaller fund’s total balance, which makes the fund’s overall performance heavily dependent on one asset. ETFs spread that risk across dozens or hundreds of underlying holdings, at the cost of the amplified upside a geared property offers. Neither answer is automatically right. It depends on the fund’s total balance, the trustees’ age and time to retirement, and how much of the fund’s income they are relying on now versus building for later.
What This Means If You’re Still Weighing a Purchase
Lenders have moved quickly to reprice around the deadline. Bluebay Home Loans cut its residential SMSF variable rate to 6.99% p.a. at 80% LVR and extended an interest-only waiver for contracts exchanging before the cut-off. Granite Home Loans reduced its SMSF Commercial Purchase variable rate to 7.59% p.a., signalling where lender appetite is heading once the residential option closes.
If your SMSF is close to a residential purchase decision, the practical question is whether contracts can genuinely exchange before 9 August 2026, not just whether finance can be arranged in principle. SMSF lending sits inside strict superannuation compliance rules, and getting the structure wrong can create problems that are expensive to unwind later. This is a decision worth working through with both a mortgage broker and a licensed financial adviser, given the tax and superannuation implications involved.
Approval timelines are the other pressure point most trustees underestimate. SMSF loans typically take longer to assess than a standard residential loan because the lender has to review the fund’s trust deed, investment strategy, and the specific LRBA structure being proposed, on top of the usual property and income checks. Leaving the application until close to the deadline significantly raises the risk of missing it altogether.
Property Without Borrowing Is Still an Option
The ban only affects borrowing. An SMSF can still buy residential property outright, using existing fund balance, without an LRBA. For funds with enough capital to purchase without gearing, this pathway is untouched by the 10 August 2026 change. The tradeoff is the same one that applies to any ungeared purchase: slower capital growth on the fund’s overall balance, but none of the borrowing compliance requirements an LRBA carries.
Key Takeaways
- New residential SMSF LRBAs are banned from 10 August 2026, with contracts generally needing to exchange by 9 August 2026 to proceed under the old rules.
- Commercial and industrial property LRBAs remain available for SMSFs after the ban takes effect.
- Existing residential SMSF loans that have already settled are grandfathered and continue unaffected.
- Lenders including Bluebay Home Loans and Granite Home Loans have already repriced SMSF products ahead of the deadline.
- An SMSF can still buy residential property outright using existing fund balance, without an LRBA.
- Given the tax and superannuation compliance implications, this decision is worth working through with a mortgage broker and a licensed financial adviser together.