Australian self-managed superannuation fund (SMSF) trustees are actively re-evaluating their investment strategies following the official commencement of a nationwide ban on new residential property borrowing within superannuation.
Despite the loss of leverage for housing, fresh market research demonstrates that investor appetite for real estate remains undiminished across the superannuation sector.
Under legislative changes that take effect from August 10, self-managed funds are prohibited from entering into new Limited Recourse Borrowing Arrangements (LRBAs) to purchase residential real estate.
The reform, enacted through the Treasury Laws Amendment (Tax Reform No. 1) Bill following a political agreement in Parliament, grandfathered all existing SMSF residential loans, ensuring that current borrowers face no obligation to sell assets and retain the right to refinance under existing terms.
New research released by Money.com.au highlights a clear shift in how SMSF trustees plan to access property markets without direct borrowing inside their fund.
According to the study, 27% of SMSF investors plan to purchase residential property outside of superannuation entirely, while 26% intend to target commercial property within their fund, where borrowing remains fully permitted under LRBA rules.
Only 12% of SMSF investors plan to buy residential real estate outright using cash reserves.
Money.com.au Property Expert Nick Burgess explained that the policy change alters the vehicle rather than the underlying investment strategy.
“The borrowing ban changes how investors can access residential property through an SMSF, but it doesn’t change the underlying appeal of the asset class,” he said.
“SMSF investors are more than twice as likely to buy residential property outside their super or invest in commercial property than purchase residential property outright within their SMSF using existing funds.
“That reflects the reality that relatively few investors have enough cash in their SMSF to buy property without borrowing,” he said.
“Commercial property is likely to become a much bigger focus because it still allows borrowing through an LRBA. For many investors, it offers the closest substitute to residential property while remaining within the SMSF environment.”
The survey reveals that 82% of Australians who do not currently hold an SMSF say they no longer see a reason to establish one without the ability to borrow for residential property, compared to just 18% who would still consider setting up a fund.
Outside of property, liquid assets are capturing substantial trustee capital, with 46% of SMSF investors planning to increase allocations to shares and exchange-traded funds (ETFs) and 23% choosing to hold greater savings in term deposits.
Key SMSF & Superannuation Policy Changes
Residential Property Borrowing Ban (LRBA Restriction)
- Effective Date: 10 August 2026
- The Change: SMSFs can no longer enter into new Limited Recourse Borrowing Arrangements (LRBAs) to acquire residential property.
- Exceptions & Grandfathering: Existing residential LRBAs remain fully grandfathered, permitting continued loan terms and refinancing options. Borrowing via LRBAs remains permitted for commercial property.