The short answer

The 2026 LRBA changes take effect on 10 August 2026. From that date, a self-managed super fund can only use a limited recourse borrowing arrangement to buy real property if that property is business real property.

That is the whole change in one sentence. Residential property bought through an SMSF with borrowed money is finished. Commercial property bought through an SMSF with borrowed money continues — but only if the property passes a test that a lot of people are about to discover they have never actually read.

If you have a contract on the table right now, the date that matters is the date contracts are exchanged, not the date you settle and not the date the loan is written.

What the 2026 LRBA changes actually do on 10 August

The ATO’s wording is blunt: “An LRBA can only be used to acquire real property if the property is business real property.”

An LRBA — a limited recourse borrowing arrangement — is the structure that lets an SMSF borrow. The fund sets up a separate holding trust, the property sits inside it, and the lender’s recourse is limited to that one asset rather than the rest of the fund. It has been the only legal way for an SMSF to borrow to buy property since 2007.

That mechanism is not being abolished. It is being narrowed to one category of asset.

Three things are grandfathered

The ATO confirms none of the following are affected:

• Existing LRBAs entered into before 10 August 2026.
• Refinancing of existing LRBAs entered into before 10 August 2026.
• Binding contracts to acquire real property exchanged before 10 August 2026 — even if the contract settles, or the LRBA is entered into, after that date.

Read that third one again, because it is the one that decides whether a deal in progress survives. The test is contract exchange. If contracts are exchanged on 9 August and the deal settles in November, the arrangement is protected. If contracts are exchanged on 11 August, it is not — regardless of how long the deal has been in the works.

The refinancing point matters just as much for anyone already holding. If your fund has a residential LRBA in place today, you are not being forced to sell, and you are not locked into your current lender at whatever rate they decide to charge you. You can still refinance it.

The trap: “commercial” and “business real property” are not the same thing

Here is where a lot of commentary is getting sloppy, and where deals will fall over between now and Christmas.

The exemption is not for commercial property. It is for business real property. Those sound interchangeable. They are not.

Business real property is defined in section 66(5) of the Superannuation Industry (Supervision) Act 1993. It requires two things:

1. A freehold or leasehold interest in real property, and
2. That the land is used wholly and exclusively in one or more businesses.

The second limb is the one that bites. The test looks at how the land is used, not what the building is called. A property can be zoned commercial, valued as commercial, and financed by a commercial lender, and still fail — because “wholly and exclusively” leaves very little room.

What passes

• A shop, warehouse, office or industrial unit used entirely for a business. The ordinary case, and the one most of our SMSF clients are buying.
• A residential-looking property used entirely as business premises — a converted terrace running as a dental practice or an accountant’s office. The use decides it, not the façade.
• Land held as trading stock by a property developer.
• Working farms, including farmland leased to a third-party operator who farms it. Primary production counts as a business.

What fails

• Property held purely as a residential investment. This is the whole point of the change.
• Lifestyle blocks and hobby farms — rural land without a genuine business operating on it.
• Mixed-use property where part of the land is used for something other than a business. A shop with a flat above it that is separately let is the classic problem. “Wholly and exclusively” is a demanding standard, and this is the category where you should assume nothing and get advice before you exchange.

There is a safe harbour for farms: a dwelling on farmland of up to two hectares does not break the test, provided farming remains the predominant use. It is a narrow carve-out and it does not extend to non-farm mixed use.

If you are mid-deal right now

Three questions, in order:

1. Have contracts been exchanged? If yes, and the exchange was before 10 August 2026, you are grandfathered. Settlement timing does not matter.
2. If not, can you exchange before Monday? For a commercial purchase that already passes the business real property test, this is less urgent — you can still borrow after 10 August. For anything residential, or anything where the business-use test is genuinely arguable, exchanging before the deadline is the difference between a deal and no deal.
3. Does the property actually pass the test? Get this answered by your accountant or SMSF adviser in writing before you exchange, not after. A lender’s credit approval is not a ruling on business real property, and lenders are not the ones who will be assessing your fund’s compliance.

If you were planning a residential purchase through your fund and cannot exchange in time, the borrowing route is closed — but an unleveraged purchase from existing fund cash is untouched by this change, and so is buying commercial instead.

What this does not change

• Your existing loan and its terms.
• Your ability to refinance an existing LRBA.
• Buying property in your own name, in a trust, or in a company.
• SMSF purchases made without borrowing.
• Commercial LRBAs, where the property is business real property. This is the part most of the coverage has buried, and it is the reason a fair number of SMSF trustees are now looking at commercial for the first time.

Frequently asked questions

Can my SMSF still borrow to buy commercial property after 10 August 2026?

Yes, provided the property is business real property under section 66(5) of the SIS Act — a freehold or leasehold interest in land used wholly and exclusively in one or more businesses.

Can my SMSF buy my own business premises?

Yes. Business real property is one of the few assets an SMSF is permitted to acquire from, and lease back to, a related party at arm’s length terms. This is unchanged by the 10 August rules and remains one of the most common reasons funds buy commercial.

I exchanged contracts in July but settle in October. Am I affected?

No. A binding contract exchanged before 10 August 2026 is grandfathered even if it settles later, and even if the LRBA itself is entered into later.

Do I have to sell my existing SMSF residential property?

No. Existing LRBAs are unaffected, and you can still refinance them.

What deposit do I need for a commercial SMSF purchase?

Typically 30–35% of the purchase price, with LVRs to 70–80% depending on asset type and lender. See our SMSF commercial property loans page for the current ranges.

Where to get this checked

We arrange SMSF commercial lending through a panel of 20+ commercial lenders and settle more than $100m in lending a year. If you have a contract in front of you and you need to know whether your fund can still borrow against it, that is a same-day answer, not a week-long one.

This article is general information only and does not take your objectives, financial situation or needs into account. It is not tax, legal or superannuation advice. Whether a property is business real property is a question of fact that depends on the specific property and its use — get written advice from your accountant or SMSF specialist before exchanging contracts.

Soren Financial — Credit Representative 527 161, operating under Finsure Licence 384704.

Sources: ATO — Changes to LRBAs for property from 10 August · Superannuation Industry (Supervision) Act 1993, s 66(5)