Since the ban on new limited recourse borrowing arrangements for residential property took effect, the most common question from trustees has been some version of the same thing: is SMSF property finished?
It is not. What ended was one specific mechanism, which was borrowing inside the fund to buy a house. Three routes remain, and they suit very different funds.
First, What Actually Changed
The amendment prohibits an SMSF from entering into a new LRBA to acquire residential property. It operates prospectively. Arrangements entered into before commencement continue under grandfathering provisions, with no forced sell down and no reset, and the legislation permits maintaining or refinancing a pre existing borrowing.
Business real property remains eligible for acquisition under an LRBA. That carve out is doing more work than most commentary acknowledges, and it is route three below.
Route One: Buy Outright With Fund Cash
The simplest option, and for funds with sufficient balance it is often the best one.
If the fund has the cash, it can buy residential property outright. Nothing in the amendment restricts that. The fund holds the asset directly, rent flows in, and the usual superannuation tax treatment applies. Accumulation phase income is generally taxed at 15%, with a one third discount on gains from assets held longer than twelve months producing an effective rate near 10%. Assets supporting a pension, within the transfer balance cap, are generally exempt.
The trade offs. Concentration is the obvious one. A fund that spends most of its balance on one property has an illiquid, undiversified portfolio and, from 1 July 2026, a Division 296 exposure that has to be paid in cash if the member's total balance is above the threshold. Sole purpose test, related party rules and in house asset limits all continue to apply.
Who it suits. Funds with a balance comfortably larger than the purchase price, where the property is one holding among several rather than the whole strategy.
Route Two: The Unit Trust Pathway
For trustees who want residential exposure but cannot fund a full cash purchase, structures involving a unit trust have become the main area of discussion since the ban.
The general shape is that the SMSF invests into a unit trust rather than buying the property directly. The trust holds the investment and passes entitlements through to the fund, with the fund remaining the beneficial owner of its interest. Where a construction lender requires security, a bare trust can hold legal title. Funding is drawn progressively as construction proceeds on a new build, rather than through a single borrowing inside the fund.
Elite Wealth Creators documents its version of this at elitewealthcreators.com/smsffinance, which is where the detail sits.
The trade offs. This is a genuinely complex area. Unit trust arrangements involving superannuation funds sit inside a dense set of rules covering in house assets, related party dealings and the specific conditions attached to non geared unit trusts. Whether a particular structure is compliant depends on who holds the units, who controls the trust, what the trust does, and how it is funded. Set up and ongoing administration costs are higher than a direct purchase. Get it wrong and the consequences are compliance consequences, not just commercial ones.
Who it suits. Trustees working with an SMSF specialist accountant and solicitor who can assess the structure against their fund's specific circumstances, and who are building new stock rather than buying established.
Nothing in this article should be read as a recommendation that a unit trust structure is appropriate for your fund. It is a description of what exists. The suitability question belongs with your licensed adviser and SMSF specialist.
Route Three: Business Real Property
The path that stayed open and is frequently overlooked.
Commercial property that satisfies the SIS Act definition of business real property can still be acquired using an LRBA. Broadly, that covers premises used wholly and exclusively in a business. For a business owner, this route carries an additional feature that residential never had, which is the ability for the fund to acquire the property from a related party at market value and lease it back to the business on arm's length terms.
The trade offs. Not all non residential property qualifies automatically. Mixed use property, vacant land, and property with a private or residential component all need careful review before an LRBA is entered into. Lending terms for SMSF commercial finance are tighter than residential ever was, and the tenant risk profile is different. A vacant commercial property with a loan against it inside a fund is an uncomfortable position.
Who it suits. Business owners currently paying rent to a third party landlord, and trustees comfortable with commercial tenancy risk.
Choosing Between Them
The honest framing is that the three routes answer different questions.
If the question is how to hold property without borrowing at all, route one. If the question is how to get residential exposure with a balance that will not stretch to a full purchase, route two, with proper advice. If the question is how to combine a business premises with a super strategy, route three.
If your existing fund already holds a residential LRBA entered into before the ban, none of this disturbs it. Grandfathering means the loan runs to completion, and refinancing to a better rate is contemplated by the legislation, though changing lenders or loan terms materially is a conversation to have with an SMSF specialist first.
Practical Next Steps
Update the fund's investment strategy. Two material law changes have landed in quick succession with the borrowing ban and Division 296. The ATO expects strategies to be revisited.
Establish what the fund can do unassisted. Balance, cash position, contribution capacity and member circumstances come before structure.
Get structure advice from someone licensed to give it. Not from an article, and not from a product provider alone.
Model the Division 296 position alongside the purchase. A property decision and a threshold decision are now the same decision for larger balances.
Elite Wealth Creators sources property and coordinates the process alongside your accountant and adviser. You can read more on the insights page, see the SMSF pathway detail at elitewealthcreators.com/smsffinance, or book a call.
General information only, not personal financial, tax or superannuation advice. Elite Wealth Creators does not hold an Australian Financial Services Licence and does not provide advice on the establishment, structure or investment strategy of a superannuation fund. Current as at August 2026. Speak with a licensed financial adviser and an SMSF specialist accountant or solicitor before acting.