SMSF lending after the LRBA changes: what is still possible

Published 21 August 2026 · Updated 21 August 2026 · 6 min read · By Shane Heness, mortgage broker

We have had a version of this conversation with every SMSF client since June. Here is the clear version, written up once.

What changed, precisely

The prohibition is narrow and specific: new LRBAs for residential acquisitions. It is not a ban on SMSFs owning property, not a ban on SMSF borrowing, and not a requirement to unwind anything that already exists.

General information only, current at September 2026. Confirm your own position with your accountant or a licensed SMSF adviser.

The transition, and who got caught

A 45 day transition ran from 26 June 2026 to the 10 August commencement. Contracts entered into before the commencement date were able to proceed to completion afterwards. Applying for finance before the date was not enough on its own, the contract had to be in place.

The clients who got caught were the ones part way through: fund built up, pre-approval in hand, still looking for the right property. There is no workaround for that group. The strategy has to change rather than the paperwork.

If you already hold a geared residential property in your fund

Nothing changes operationally. Keep making the repayments, keep the fund compliant, keep the lease at arm's length if a related party is involved.

What is worth doing is a rate review. SMSF lending has a small lender pool, and the spread between the sharpest and dullest rate is wider than it is in ordinary residential lending. Loans written between 2018 and 2024 are frequently sitting well above what the same fund could get today, particularly where the original lender has since stopped writing new SMSF business and let the back book drift.

What a refinance can and cannot do

• Can move the loan to a new lender at a better rate.
• Can reset the loan term or change between principal and interest and interest only.
• Cannot release equity to buy another residential property inside the fund, because that is new borrowing for a residential acquisition.
• Cannot fund improvements to the property. Borrowed money under an LRBA has never been able to fund improvements, only repairs and maintenance.

If you were planning to buy residential and now cannot

Three options, in the order we usually work through them.

1. Buy residential outright with fund cash

Ungeared, so it needs the whole purchase price plus costs sitting in the fund. For funds with a large balance and a long runway to retirement this is still viable, and it removes the LRBA complexity entirely. For most funds it is simply out of reach, which is why gearing existed.

2. Look at commercial instead

Borrowing for business real property is untouched by the change, and for business owners it is often the better strategy anyway. If your business currently pays rent to a landlord, the fund owning those premises redirects that rent into your own superannuation. Business real property is exempt from the in-house asset rules, so the lease back to your own business is permitted, provided it is at market rent on genuine commercial terms.

3. Rethink whether the fund should hold property at all

Worth saying plainly: the gearing strategy was doing a lot of work in a lot of SMSF property plans, and without it the case for holding a single illiquid asset in a fund is weaker than it was. That is a question for your adviser and your accountant, not for a broker. We will tell you when the finance question is not the real question.

What the commercial path requires

More than a residential purchase did. The fund needs a deposit of 25% to 35% plus stamp duty and costs, a liquidity buffer of six to twelve months of repayments left in the fund after settlement, a corporate trustee in most cases, a trust deed that permits borrowing, and a separate holding trust. Allow six to ten weeks from application to settlement, driven mostly by the commercial valuation and the lender's legal review of the deeds.

The single most common thing that stops a good commercial SMSF deal is a trust deed that does not permit borrowing. We read the deed before anything goes to a lender, because fixing it afterwards costs time nobody has once a contract is signed.

Where this leaves things

SMSF lending has narrowed, not ended. The work now sits in two lanes: refinancing the residential loans already in the system, and financing commercial property for funds whose members run a business. Both are active, and both have small enough lender pools that lender selection changes the outcome materially.

The business premises strategy, worked through

For SMSF members who run a business, the commercial path is not a consolation prize. It is frequently the strategy that should have been used from the start.

Consider a trade business paying $4,500 a month to lease a factory unit in Wetherill Park. The members have $420,000 in their SMSF. The unit next door is for sale at $850,000.

Illustrative only. Not tax, superannuation or financial advice. Confirm with your accountant and a licensed adviser.

The strategy works because business real property is exempt from the in-house asset rules. Without that exemption, a fund leasing an asset to a related party would breach the 5% in-house asset limit almost immediately.

Three conditions have to hold. The property must be used wholly and exclusively in a business, so a unit with a residential component is a problem. The lease must be genuinely at market rent, evidenced by an independent appraisal. And the rent has to actually be paid, on time, every month. A related party lease with arrears is the fastest way to turn a good strategy into a compliance problem at the next audit.

The constraint in practice is usually the deposit. At 65% to 75% LVR the fund needs 25% to 35% of the price plus duty, plus a liquidity buffer left over. For many funds that means a contribution plan across two or three years before a purchase is realistic, which is a conversation to start with your adviser now rather than when the right unit comes up.

Our SMSF loans page sets out both lanes in detail, including the business real property test and the lending parameters we see across the panel. If you want your existing SMSF loan reviewed or a commercial purchase assessed, book a free call. We are also happy to join a call with your accountant rather than run a separate conversation.

Frequently asked questions

Written by Shane Heness

Owner and mortgage broker at LoanBuddy, Parramatta NSW. Eight years as a mortgage broker and a property investor since 2015. Credit Representative #528658 under Australian Credit Licence #389328.