The residential borrowing ban has forced many SMSF investors to reconsider their strategy. For those who planned to use an LRBA to buy residential property, shares and commercial property are now the primary alternatives. This page compares property and shares head to head so SMSF investors can make an informed decision in 2026.
The Core Trade-Off
Property and shares serve different roles inside an SMSF. Property provides tangible, leverageable assets with income stability and capital growth potential. Shares provide liquidity, diversification and lower minimum investment thresholds. The right mix depends on your fund’s size, members’ ages, income needs and risk tolerance.
SMSF Property vs Shares — Side-by-Side Comparison
| Factor | Property (Commercial) | Australian Shares (ASX) |
|---|---|---|
| SMSF borrowing allowed (2026)? | Yes (commercial LRBA) | Yes (margin lending via LRBA) |
| Typical annual return | 7% to 11% (yield + growth) | 9% to 11% (dividends + growth, long run) |
| Income yield | 5% to 8% (commercial) | 4% to 5% (fully franked) |
| Liquidity | Low (months to sell) | High (sell same day) |
| Franking credits | No | Yes (major ASX stocks) |
| Leverage available? | Yes (commercial LRBA) | Yes (instalment warrants) |
| Minimum investment | $150,000+ | $500+ |
| Management effort | Medium to high | Low (index funds) |
| Volatility | Low (short term) | High (short term) |
| Tax on rental/dividend income in accumulation | 15% | 15% (offset by franking credits) |
The Franking Credit Advantage of Shares
Australian shares carry a significant tax advantage inside an SMSF that is often underestimated. Fully franked dividends from ASX blue-chip stocks come with a 30% company tax credit attached. Inside an SMSF in accumulation phase (taxed at 15%), the excess franking credit is refunded to the fund. In pension phase (zero tax), the full franking credit is refunded. This effectively boosts the after-tax yield of Australian shares significantly compared to property income.
Why Commercial Property Still Wins for Many SMSFs in 2026
Despite the franking credit advantage of shares, commercial property retains several structural advantages for SMSF investors with sufficient capital:
- Leverage (LRBA) amplifies returns in a way that is difficult to replicate with shares inside an SMSF
- Net leases provide predictable, contractually locked-in income for 3 to 10 years
- Business owners can buy their own premises, creating a uniquely powerful wealth loop
- Property is not subject to daily mark-to-market volatility — important for members close to retirement
GeeVee Verdict
For most SMSFs in 2026, the optimal strategy is a combination of both. Commercial property provides leveraged, income-stable exposure to real assets. Australian shares provide liquidity, franking credits and diversification. A 60/40 split (property/shares) is a common starting point for SMSFs with balances above $500,000. For smaller funds, shares and ETFs are more practical until the balance supports a commercial property acquisition.
Whether you are building your SMSF strategy from scratch or reassessing after the borrowing ban, the Collings Property Platform gives you access to off-market commercial opportunities, portfolio tracking, investment tools, and property insights powered by GeeVee AI. Join free today and start building your property future. collings.com.au/portal
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