What the New Borrowing Rules Mean for Investors
If you own property through a Self-Managed Super Fund (SMSF), or have been considering it, recent changes to borrowing rules are worth understanding.
While existing investments are generally protected, new restrictions will change how SMSFs can use borrowing to purchase residential property in the future.
What has changed?
From 10 August 2026, Self-Managed Super Funds will no longer be able to establish a new Limited Recourse Borrowing Arrangement (LRBA) to purchase residential property. Existing residential property borrowing arrangements entered into before the changes are generally unaffected and can continue under the existing rules.
Importantly, this does not prevent an SMSF from owning residential property altogether. Rather, it changes how those properties can be acquired using borrowed funds.
What is a Limited Recourse Borrowing Arrangement?
A Limited Recourse Borrowing Arrangement is a structure that allows an SMSF to borrow money to acquire a single asset, such as an investment property. If the loan defaults, the lender’s rights are generally limited to that asset rather than the entire SMSF portfolio. These arrangements have been subject to strict rules for many years.
What does this mean for property investors?
For many investors, the changes won’t require immediate action.
If you already own residential property within your SMSF under an existing LRBA, your current arrangement is generally grandfathered under the new legislation.
However, if you were planning to purchase residential property through your SMSF using borrowed funds in the future, you’ll need to discuss alternative strategies with your accountant or licensed financial adviser.
Depending on your circumstances, options may include:
- Purchasing without borrowing using available SMSF funds.
- Considering commercial property where appropriate.
- Reviewing your broader investment strategy.
- Purchasing property outside your SMSF structure.
The right approach will depend entirely on your personal financial circumstances and retirement objectives.
Why this matters
Property continues to be an important long-term investment for many Australians, including those planning for retirement.
Changes to taxation and superannuation legislation can influence investment decisions, finance options and long-term planning. Staying informed allows investors to make decisions based on current legislation rather than outdated information.
Our advice
Whether you’re buying your first investment property or expanding an existing portfolio, it’s important to seek advice from qualified taxation and financial professionals before making any decisions involving your SMSF.
Our team works closely with accountants, financial advisers and property investors throughout the Mid North Coast and is always happy to discuss the local property market and opportunities available.
If you’re considering your next property investment, we’d love to help you understand what’s happening in the market and connect you with the right professionals to support your investment journey.
Further reading
Changes to LRBAs for property from 10 August | Australian Taxation Office
Disclaimer: This article provides general information only and does not constitute financial, taxation or legal advice. Self-Managed Super Funds are governed by complex legislation, and investors should obtain advice from a licensed financial adviser, accountant or legal professional before making investment decisions. For the latest information, visit the Australian Taxation Office’s guidance on Limited Recourse Borrowing Arrangements.