Following the announcement of the SMSF residential borrowing ban, SMSF investors across Australia are asking whether they can still buy apartments through their fund. The answer depends on how you intend to finance the purchase.

What the Ban Means for SMSF Apartment Purchases

The proposed legislation prohibits new Limited Recourse Borrowing Arrangements (LRBAs) for residential property — including apartments, units and townhouses. It does not prohibit outright apartment purchases using SMSF cash or liquid assets.

Can an SMSF Buy an Apartment Without Borrowing?

Yes. SMSFs with sufficient funds can still purchase apartments outright. The restriction is specifically on new LRBAs for residential property — not on SMSF ownership of residential property itself.

Apartments vs Commercial Property for SMSF Investors

With the residential borrowing ban in place, many SMSF investors are now comparing apartments (cash only) against commercial property (where borrowing remains available). Key considerations include:

• Commercial property LRBAs remain available — allowing leverage on commercial purchases
• Residential apartments must be purchased outright — no SMSF borrowing for new apartment LRBAs
• Commercial property typically offers higher gross yields (5-8%) compared to residential apartments (2.5-4.5%)
• Residential apartments in inner-city Melbourne and Sydney may offer stronger capital growth prospects
• Business premises (where the SMSF member operates) remain a viable SMSF commercial strategy

Frequently Asked Questions

Can my SMSF buy an apartment in 2026?

Yes — if your SMSF has sufficient cash to purchase outright. New SMSF LRBAs for residential apartments are prohibited under the proposed legislation.

Are existing SMSF apartment loans affected?

No. Existing LRBAs are expected to be grandfathered under the legislation. The ban applies to new borrowing arrangements only.

Is an apartment a good SMSF investment without borrowing?

Without leverage, the yield and return profile of a residential apartment changes significantly. An SMSF specialist can model the cash flow impact for your specific fund.

Access Off-Market SMSF Investment Opportunities

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