If your self managed super fund (SMSF) is planning to borrow to buy property, the rules have changed. Residentially zoned property is now largely off the table for geared purchases, unless the property is used for business. If your fund already has a borrowing arrangement in place, you are most likely fine. Here is what changed and how to tell where you stand.
An SMSF can borrow to buy a single asset using a limited recourse borrowing arrangement (LRBA). Until now, there was no restriction on the type of asset the fund could buy this way.
From 26 June 2026, any property bought through an LRBA must meet the "business real property" (BRP) test - broadly, property used wholly and exclusively in a business. The test looks at how the property is actually used, not how it is zoned or what it was originally built for.
This change is relevant to you if all three are true:
Your SMSF is borrowing, or is about to borrow, through an LRBA;
The purchase is a new arrangement entered into after 10 August 2026; and
The property would not be used wholly and exclusively in a business.
If that is you, the arrangement needs a rethink. If it is not, read on for where existing arrangements land.
This is the part that gets misread. The rule does not automatically rule out property that looks residential. What matters is use, not appearance. A house that is used entirely as a medical practice, for example, can still qualify as business real property, because it is used wholly and exclusively in a business. A house rented to a family to live in does not. The building can be identical: the difference is how it is used.
A 45-day transitional period ran to 10 August 2026. Arrangements genuinely entered into before that date can proceed under the old rules, and existing LRBAs over property that does not meet the BRP test can continue. You can also refinance an existing arrangement, subject to your lender agreeing to the new terms. In other words, this is a change to what your fund can buy from here, not a rule that unwinds deals already done.
If your SMSF is mid-way through a property purchase, or you were counting on borrowing to buy one, talk to us before you sign anything. The line between "residential" and "business real property" is exactly where these arrangements succeed or fall over, and it is worth getting right the first time. We will tell you plainly whether your plan still stacks up and what your options are.