For years, one of the questions I was asked most about super was whether a self-managed fund could borrow to buy a residential investment property. The answer was yes, within strict rules. Since 10 August 2026, for any new arrangement, the answer is no.
The change came in the same law as the negative gearing and capital gains changes, passed by Parliament in June 2026. A good deal of what people hear about it is half right, so I want to set out plainly what it does and what it does not change.
What a self-managed super fund is
A self-managed super fund, or SMSF, is a private super fund whose members are also its trustees. It can have up to six members. The trustees make the investment decisions and are responsible for keeping the fund within superannuation law. The rules do not go away; what changes is who makes the decisions.
What changed on 10 August 2026
An SMSF used to be able to borrow to buy residential property through a limited recourse borrowing arrangement, where the lender's claim is limited to the property being bought. From 10 August 2026, a fund that enters into a new arrangement of this kind to buy real property can do so only for business real property: land and buildings used wholly and exclusively in a business. A house or an apartment let to tenants does not qualify.
What did not change
- An arrangement entered into before 10 August 2026 keeps going. The property does not have to be sold, and the ATO has said refinancing one of these loans is not affected.
- If a contract was exchanged before 10 August 2026, the fund can still complete it, even where settlement came later.
- A fund can still borrow to buy business real property, such as premises a business runs from.
- A fund can still hold residential property it buys without borrowing, within the usual rules.
- Super funds, including SMSFs, sit outside the 2026 negative gearing changes.
The rules a fund still runs under
Whatever it holds, a fund must be run for one purpose: paying for its members' lives after work. A residential property in a fund cannot be lived in or rented by a member or anyone related to them, and it cannot be bought from a member. Money from a sale stays in the fund until a member meets a condition of release, such as retiring after reaching their preservation age, which is now 60 for everyone.
Who this does not suit
An SMSF is not for everyone, and since August it suits fewer of the people thinking about residential property. Without borrowing, a fund needs enough of its own money to buy a property outright and still keep cash to meet its costs. A fund holding one large asset has little spread. If the members do not want to be involved in the decisions, or the balance is modest, a large fund may serve them better.
The questions I would ask
- Does your fund already hold property under a loan set up before 10 August 2026?
- If so, does that loan still suit the fund, and when does it end?
- Is any property in the fund, or any you are thinking about, used in a business?
- How much of the fund's balance would a property tie up, and what would that leave?
- What income do the members want the fund to produce in retirement?
Seeing it whole
Super is one part of the picture, alongside the property you hold in your own name. The change in August makes it more important, not less, to see how the two work together before you decide anything. That is the conversation I have most often with people who have spent years building.
Nicholas Lockhart
General information only. No advice is given. This article reflects the law as at 10 October 2026. Setting up or changing an SMSF is a decision to make with a licensed adviser and an accountant who specialises in SMSFs.
Source: Treasury Laws Amendment (Tax Reform No. 1) Act 2026, Schedule 5.