The rules around self-managed superannuation funds (SMSFs) and property changed on 10 August 2026. From that date, an SMSF can no longer use a limited recourse borrowing arrangement (LRBA) to borrow for a new residential property purchase. Two things are worth being clear about straight away, because the headlines have blurred them. An SMSF can still buy residential property outright with its own cash, and it can still borrow to acquire business real property. What changed is borrowing for new residential purchases, not owning residential property inside super.

Can your SMSF still borrow to buy property?

From 10 August 2026, an SMSF can no longer take out a new LRBA to buy residential property. That is the whole of the change, and it is worth being precise about what it does and does not mean.

It does not stop your SMSF owning residential property. A fund with enough cash can still buy a residential property outright, without borrowing. What has gone is the ability to use a new loan to fund a residential purchase.

Existing arrangements are untouched. If your SMSF already holds a residential property under an LRBA, it is grandfathered. There is no forced sale and no requirement to unwind it, and it runs to its natural term. You can also still refinance that loan, including switching to a new lender for a better rate, as long as the refinance is like-for-like and does not increase the borrowing.

Commercial property is different again. An SMSF can still enter a new LRBA to acquire commercial property that meets the business real property test, so the ability to use debt inside super stays fully intact for that asset class. The legal test is business real property, not simply the word "commercial". Most commercial premises used wholly in a business will qualify, but some will not, and a small number of residential-style properties can. This is one to check property by property.

Commercial vs residential rental yields

Commercial property typically generates a higher rental yield than residential. PropTrack's Commercial Yields data for March 2026 shows the gap clearly across the major markets.

Across the same period, gross residential yields sat well below commercial in every capital, according to Cotality. Even commercial's weakest performer, industrial property in Sydney at 4.2%, came in more than a full percentage point above residential.

Inside an SMSF, that gap compounds. Rental income is taxed at just 15%, rather than an investor's marginal rate, which can reach 45% before the Medicare levy. A higher-yielding commercial asset makes that tax advantage work harder. In pension phase the rate drops to zero, so the full rental income stays in the fund.

Leasing commercial property back to your own business

One advantage commercial property holds for business owners is the ability to lease it back to a related party, such as a business owned by a fund member. This is permitted under the ATO's rules, provided the lease is on arm's-length commercial terms.

It can work well on both sides. The business pays market rent straight into super, building retirement savings, while the property grows inside a concessionally taxed structure. Residential property offers no equivalent flexibility.

Who pays the outgoings, you or the tenant?

A practical difference that surprises a lot of investors is how outgoings are handled. With residential property, most holding costs (council rates, insurance, maintenance) fall to the landlord. With commercial property, leases commonly require the tenant to cover these directly, which lowers the net cost of ownership for the fund.

A lease that passes outgoings to the tenant gives you a cleaner, more predictable income stream. That matters for an SMSF, because there is no salary inside the fund to absorb an unexpected bill. Any shortfall has to be met through member contributions, which are capped.

Deposits, LVRs and lender appetite

Commercial property, inside an SMSF or not, can be more complex. Lenders look closely at the quality of the tenant, the length of the lease, the location and the likely resale market. As a broad rule, loan-to-value ratios on commercial loans sit lower than on residential. But deposit size is where expectations and reality tend to part ways.

Many people assume a commercial purchase needs a 30 to 50% deposit. Sometimes that holds, particularly for specialised security types or properties in regional or remote areas, where lenders take a more conservative view. For good quality commercial property, though, some lenders will consider a deposit as low as 20%, which puts the borrowing requirement on par with a standard residential purchase.

The pool of lenders offering this kind of finance is smaller, which can narrow your options. That is exactly why the broker you work with matters. Someone who understands both the SMSF lending framework and the commercial property market is essential, because the lender panel, structuring and requirements are materially different from any other loan.

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Thinking about commercial property in your SMSF? Get in touch with the team at Divitis Finance to talk through your options.

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