Can an SMSF borrow to buy an investment property?

Only for business property now. Since 10 August 2026, a self-managed super fund that borrows under a limited recourse borrowing arrangement can buy real property only if it is business real property, used wholly and exclusively in a business. A house or unit let to tenants does not qualify. A borrowing or a binding contract from before that day is not affected. This is the law as read on 17 October 2026.

What is the rule?

The change is in Schedule 5 of the Tax Reform No. 1 Act, which adds paragraph 67A(2)(c) to the Superannuation Industry (Supervision) Act 1993. The ATO explains it on its limited recourse borrowing arrangement page, and says these arrangements are not banned. The property must meet the business real property test from the day it is bought until the arrangement ends.

How does a limited recourse loan work?

The borrowed money buys a single asset, or a set of identical assets of the same market value. It can also pay the costs of borrowing, buying, maintaining or repairing the asset, but not of improving it. The fund holds the asset on trust and has a beneficial interest in it, with the right to take legal ownership by making payments. If the loan is not paid, the lender can claim only that asset. Section 67A sets no dollar cap, deposit or loan to value ratio.

Does it reach a loan the fund already has?

No. The rule applies to arrangements entered into from 10 August 2026. It does not apply to an earlier borrowing, to refinancing it, or to a purchase under a binding contract entered into before that day, even if settlement comes later. The ATO adds that a contract changed so much that its fundamental terms no longer exist may count as a new arrangement.

What should a fund keep?

• The loan agreement and the date the arrangement was entered into.
• The date of the binding contract for the property, and any changes made to it.
• The trust deed that holds the asset, and the fund's records of its payments.

PropRetire keeps super fund balances and payments in the SMSF records guide, next to the properties and loans the household holds.