The rule that changed

An SMSF generally cannot borrow. Before 10 August 2026, section 67A of the superannuation law made an exception for certain limited recourse borrowing arrangements. Schedule 5 of the 2026 Act added a condition: if the asset being acquired is real property, it must be business real property. An ordinary house intended as residential rental property does not become business real property merely because it earns rent. Read Schedule 5 of the enacted law.

What counts as a new arrangement

The change applies to arrangements entered into on or after 10 August 2026. It affects the borrowing exception, not the basic ability of an SMSF to hold a permitted investment. A fund considering a residential property bought entirely from its own cash still needs to meet its trust deed, investment strategy, sole purpose, ownership, related-party and liquidity requirements.

Earlier arrangements

Schedule 5 contains transition rules for earlier borrowing arrangements. It also addresses refinancing an earlier borrowing and an asset acquired under an arrangement entered into before commencement, even if settlement occurs later. The statutory words are “arrangement,” “borrowing” and “acquisition”; a date on one document is not enough to decide how a complicated land-and-build transaction is treated.

Buying without borrowing

This does not mean every kind of property loan is prohibited. The amended section 67A still refers to business real property, and section 67 contains other limited borrowing exceptions. Nor should a fund assume that a house-and-land package can be reshaped into a compliant borrowing arrangement by changing labels. The actual asset and documents matter.

Questions for your advisers

Before relying on a transition, ask a solicitor to map each contract and settlement against Schedule 5. Ask a licensed financial adviser whether the fund's proposed investment and cash position are appropriate for its members. Bell Morgan can explain property and building facts; it cannot decide what the superannuation law means for a particular fund.

Sources & review

Prepared by Adrian Chenh. These sources inform the general information above.

General information only. Discuss your circumstances and any proposed arrangement with licensed financial, tax and legal advisers.