SMSF Borrowing to Acquire Real Property – Changes to the Law and Common Questions

Leonie Carruthers|9th September 2026

From 10 August 2026, SMSFs using limited recourse borrowing arrangements (“LRBAs”) can only acquire real property if it is business real property. This article explains the change. It also discusses common questions we are asked about buying properties via an LRBA and transferring that property to the fund trustee after the loan is repaid.

Changes from 10 August

It has been widely reported that, from 10 August 2026, SMSFs can no longer acquire residential property using borrowings under an LRBA.

To be specific, the new legislation does not prohibit SMSFs from acquiring residential property under an LRBA, but limits any acquisition of real property under an LRBA to “business real property”, as defined in the Superannuation Industry (Supervision) Act 1993 (Cth) (“SIS Act”).

The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 received Royal Assent on 26 June 2026. Schedule 5 amends the definition of an acquirable asset in s 67A(2) of the SIS Act by adding the following requirement: “for an asset that is real property – the asset is business real property (within the meaning of section 66 of this Act)”.

“Business real property” is defined as (emphasis added):

  • any freehold or leasehold interest of the entity in real property; or
  • any interest of the entity in Crown land, other than a leasehold interest, being an interest that is capable of assignment or transfer; or
  • if another class of interest in relation to real property is prescribed by the regulations for the purposes of this paragraph – any interest belonging to that class that is held by the entity;

where the real property is used wholly and exclusively in one or more businesses (whether carried on by the entity or not), but does not include any interest held in the capacity of beneficiary of a trust estate.

For example, a vacant industrial lot could only be acquired by an SMSF under an LRBA if the property is wholly and exclusively used in one or more businesses.

Whether a certain parcel of land is business real property depends on the circumstances. The Commissioner’s views on what is and what is not business real property can be found in SMSFR 2009/1.

Transitional rules allow SMSFs that acquired property that is not business real property before 10 August 2026 to refinance the borrowing without breaching the SIS Act.

SMSFs can continue to acquire property that is not business real property without borrowing, subject to the existing investment rules – such as the sole purpose test, the related party acquisition rules and the in-house asset rules.

How should the Buyer be expressed on the Contract when property is acquired via an LRBA?

We often get asked for assistance to complete an offer using a standard contract where an LRBA is involved.

The “Buyer” on the Contract should be the trustee of the bare trust required by s 67A of the SIS Act, and the trust relationship should be noted. For example: “Jones Pty Ltd as trustee for the Jones Bare Trust”.  It is also appropriate (though usually not strictly necessary) to identify the SMSF, for example: “Jones Pty Ltd as trustee for the Jones Bare Trust as trustee for the Jones Superannuation Fund”. Only the trustee of the bare trust, not the name of the trust itself, will be recorded on the Certificate of Title under the Torrens system.

Is the SIS Act breached if  the loan has been repaid but the property has not immediately been transferred to the trustee of the SMSF?

Transfers from bare trustees (or “custodians”) to SMSF trustees can often be achieved with concessional transfer duty, depending on the jurisdiction.  In Western Australia, s 126 of the Duties Act 2008 (WA) imposes $20 duty on transfers between a custodian (the trustee of the bare trust) and the trustee of a relevant entity (a superannuation fund).  Section 67A(1)(c) of the SIS Act requires the LRBA terms to allow the trustee to acquire legal ownership after making “one or more payments” under the LRBA. Because SMSFs cannot give a charge over, or in relation to, an asset of the fund, the transfer from the bare trust to the SMSF cannot occur until the loan is repaid and the mortgage discharged. It is good practice to complete the transfer as soon as possible (and in keeping with a trustee’s general law duty to “get in” the trust assets) but failure to do so immediately will not, of itself, breach the SIS Act.

For example, the in-house asset definition specifically excludes an investment where, “at a time”, the SMSF invests in a related trust described in s 67A(1)(b) “in connection with a borrowing”.  Once the loan is repaid, the investment in the related bare trust is no longer connected with a borrowing and, it would appear, is thereafter treated as an in-house asset. That could breach the limitation on in-house assets (if it causes the fund to exceed the 5% in-house asset threshold) but the Regulator has, pursuant to s 71(1)(f) of the SIS Act, excluded such assets from being in-house assets in the legislative instrument Self Managed Superannuation Funds (Limited Recourse Borrowing Arrangements – In-house Asset Exclusion) Determination 2014.

When assessing the transfer to the SMSF trustee, RevenueWA will require a copy of the duty endorsed contract (or the contract along with the corresponding Certificate of Duty).  Applications must be made in the approved form and comply with RevenueWA’s duty information requirements.

Munro Doig has extensive experience working with SMSF advisers, including advising on LRBA structures, preparing the required documents and attending to property transfers. If you require assistance, please contact Leonie Carruthers.