Can SMSFs Still Borrow to Buy Property in Australia?
For residential property: no — not through a new Limited Recourse Borrowing Arrangement. The Australian Government’s proposed ban prohibits SMSFs from establishing new LRBAs to purchase residential property.
For commercial property: potentially yes. The ban specifically targets residential property. SMSFs may still be able to borrow via an LRBA to purchase commercial property — including warehouses, offices, retail assets, medical centres and industrial property. Always confirm this with your SMSF adviser and the current ATO guidance.
What Is an LRBA?
A Limited Recourse Borrowing Arrangement is the legal structure that allowed SMSFs to borrow money to purchase assets. The key feature is that the lender’s recourse is limited to the specific asset purchased — if the fund defaults on the loan, the lender can only claim the property, not the other assets in the fund. This structure made SMSF borrowing attractive but is now prohibited for new residential property acquisitions.
What About Existing SMSF Loans?
Existing LRBAs for residential property are expected to be grandfathered under transition provisions. This means:
- You do not have to immediately repay your existing SMSF residential property loan
- You can continue to hold and manage the property as normal
- The question of refinancing, extending or restructuring existing LRBAs under the new rules requires specific legal and accounting advice
Can I Borrow to Buy Commercial Property Through My SMSF?
The ban targets residential property specifically. Commercial property LRBAs may still be available — this is the most important strategic distinction for SMSF investors to understand right now. If you were planning to use an LRBA for residential property, consider whether a commercial property acquisition (office, warehouse, industrial unit, medical centre) could deliver equivalent or better returns while remaining within the new rules.
What Are My Alternatives to Borrowing in an SMSF?
| Strategy | How It Works | Best For |
|---|---|---|
| Cash-funded residential purchase | Buy residential property using existing fund assets | Well-funded SMSFs with $500k+ in assets |
| Commercial LRBA (if permitted) | Borrow to buy commercial property | Investors wanting leverage with income-producing assets |
| Property ETFs / REITs | Invest in listed property trusts inside super | Funds building toward direct property ownership |
| Accelerated contributions | Maximise concessional and non-concessional contributions | Members within 5-10 years of a planned purchase |
| Off-market acquisition | Access discounted property before public listing | Cash-funded SMSFs seeking to maximise capital efficiency |
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