You might remember that we recently wrote about the new rules restricting SMSFs from borrowing to buy residential property.
Those rules started on 10 August 2026 and they are now law. In simple terms, an SMSF generally can no longer enter into a new limited recourse borrowing arrangement (LRBA) to buy an ordinary residential investment property.
But it seems the conversation isn’t over.
Two industry bodies, the Auditors Institute and the Institute of Financial Professionals Australia, have now put five alternatives to the Federal Government. Their argument is that the new rules may have gone further than they needed to.
And one of their ideas in particular caught our attention.
What about new housing?
The industry bodies have suggested that SMSFs could still be allowed to borrow to buy newly built residential property.
There is some logic to the argument. Australia needs more housing. Buying an existing house doesn’t add another home to the housing supply, while investing in a new build does.
If part of the concern about SMSF borrowing is competition with home buyers for existing residential property, could newly built housing be treated differently?
It’s an interesting question, particularly at a time when governments are looking for ways to encourage investment in new housing.
What else is being suggested?
There are four other ideas on the table.
Rather than the current approach, the industry bodies have suggested the Government could specifically restrict borrowing for residential property, instead of generally requiring real property purchased under a new LRBA to qualify as business real property.
They have also suggested testing whether a property qualifies as business real property when it is acquired, limiting an SMSF to one LRBA at a time, or introducing loan-to-value limits on SMSF borrowing.
In other words, they are asking whether the Government’s objective could be achieved with more targeted restrictions rather than the broader rules we now have.
Of course, these are industry proposals only. The Government has not adopted them and the law has not changed again.
So what can an SMSF actually do now?
This is where we think some of the headlines have been confusing.
SMSFs have not been banned from investing in residential property.
What changed on 10 August was the ability to use a new LRBA to borrow to buy ordinary residential investment property.
An SMSF with sufficient funds can still potentially buy residential investment property outright, subject to all the usual SMSF rules. Eligible business real property can also still potentially be acquired using an LRBA.
There are also transitional provisions protecting certain arrangements entered into before 10 August, so people with an existing LRBA shouldn’t read these headlines and assume their current arrangement has suddenly become prohibited.
Is the property borrowing ban here to stay?
For now, yes. The rules that commenced on 10 August are law and SMSF trustees need to work within them. Nothing in these new industry proposals changes that.
But what happens from here will be interesting.
We can understand why the idea of allowing SMSFs to help fund new housing is being raised. Australia needs more homes and there is a very large pool of Australian retirement savings looking for long-term investments. At the same time, super is there to provide for people’s retirement, so appropriate safeguards matter.
The question is whether an outright restriction is the best way to achieve that balance, or whether a more targeted approach could do the job.
For now, we wait and see. We’ll keep following the debate and let you know if anything changes.
This article contains general information only and does not constitute financial, tax, credit or legal advice. SMSF borrowing and property transactions are subject to strict rules and individual circumstances differ. You should obtain appropriate professional advice before entering into an SMSF property transaction or borrowing arrangement.