If your self managed super fund already has a loan on a residential property, you can stop scrolling through news headlines looking for bad news. The short version is that almost nothing changes for you. The longer version is worth reading anyway, because the worries we have been hearing from clients over the past few weeks are specific, and you deserve a specific answer rather than a general one.
Part of the confusion is understandable. Most of the coverage of this change has been written for people who were thinking about setting up a loan, not for people who already have one, so it tends to lead with the ban rather than the exceptions. If you skim a headline that says SMSF property loans are banned, it is a completely reasonable reaction to wonder whether that includes you. It does not, and this article is really just working through why, one specific concern at a time. If you want the fuller background on how the change actually came about and how it works, we walked through that in part one of this series. Here, we are only interested in your situation, not the politics behind it.
The change itself is simple to state. From 10 August 2026, a self managed super fund can no longer set up a new loan to buy a residential property. Notice the word new. That is the entire point that matters to you, and we will keep coming back to it.
“I saw a headline that said SMSF property loans have been banned. Does that include mine?”
No. The government has been explicit that the change only stops new arrangements from being established from 10 August onward. If your fund already had a loan in place buying a residential property before that date, the law treats your arrangement as grandfathered. Grandfathering is a fairly old fashioned way of saying that something set up under the old rules keeps living under the old rules, even after the rules change for everyone starting fresh. Nobody is reaching back into loans that already exist to unwind them or reclassify them.
“Is the government going to force me to sell the property or pay the loan out early?”
No, and this is worth saying plainly because it is the fear that seems to worry people the most. There is no unwinding, no forced sale, and no early repayment requirement anywhere in the legislation. Your fund keeps the property, keeps the loan, keeps the bare trust structure holding legal title while the loan is outstanding, and keeps making the same repayments it always has. Once the loan is eventually paid out in full, the property moves into your fund’s name exactly the way it always would have, on exactly the same terms you originally agreed to. The only thing that has actually closed is the option for someone else to start a brand new version of what you already have.
“Will my rent, or the tax I pay on it, change because of this?”
No. Rental income inside your fund is still taxed at the same flat rate it always was, 15 per cent while your fund is in accumulation phase, and zero once the fund moves into pension phase. For context, that is well below what most people pay on rental income held in their own name once you add it to a normal salary. The capital gains treatment when you eventually sell has not moved either, your fund still gets the same concessional treatment inside super that it always has. None of the tax settings that made this strategy worthwhile in the first place have been touched. What changed is only who is allowed to start one of these arrangements from now on, not what happens inside one that already exists.
“I was thinking about refinancing to get a better interest rate. Can I still do that?”
Probably, but this is genuinely the one area where we would tell you to slow down rather than assume. Refinancing your existing loan to a different lender, on paper, should not count as setting up a new arrangement, since you are not buying a new asset, only changing who you borrow from. In practice, the Australian Taxation Office has not yet given detailed guidance on exactly where that line sits, and a handful of SMSF specialists around the country have flagged it as a genuine grey area rather than a settled question. There is also a practical wrinkle worth knowing about. Back in 2019, when a similar ban was floated and then dropped, all four major banks quietly withdrew their SMSF lending products from the market before any legislation had even passed. Something similar could easily happen again this time, which means the refinancing option you are picturing today might simply not exist by the time you go looking for it. If a better rate is tempting you, get it checked against your fund’s specific paperwork sooner rather than later, rather than assuming it will still be available, or automatically treated the same as your current loan, six months from now.
“My fund borrowed from a family member rather than a bank. Does any of this still apply to me?”
Yes, in the same way. A related party loan is still an LRBA, and the same grandfathering protection applies to it as to a bank loan, provided it was set up before 10 August 2026 and meets the arm’s length terms the Tax Office already expects, things like a commercial interest rate and a sensible loan to value ratio. What matters for grandfathering is the date the arrangement was entered into, not who happened to be sitting on the other side of the loan.
“What if I want to sell the property before the loan is fully repaid?”
Nothing about selling has changed either. If your fund sells the property while there is still a loan against it, the sale proceeds pay out the loan first, the bare trust arrangement then closes, and whatever is left over stays in your fund the same way it always would have. The change only stops someone from setting up a brand new residential LRBA from 10 August. It has nothing to say about what you do with an existing one, whether that is holding it for another twenty years or selling it next month.
“Does this change anything about how my fund gets audited each year?”
No. Your annual audit still looks at exactly the same things it always did, whether the loan meets the arm’s length terms it was set up under, whether the sole purpose test is being met, whether the bare trust structure is being maintained properly, and whether the fund’s records are accurate. This change did not add a single new question to that process for arrangements that already existed before 10 August. Your auditor is not going to treat your fund any differently because of a law that, from your fund’s point of view, essentially does not apply to it.
“Can I add a second property, or extend the same loan to buy something else?”
No. Grandfathering protects the specific arrangement you already have, not a general licence to keep using the same fund for new residential purchases. If you were planning to use the same fund to add another rental property down the track using a new loan, that plan needs to be rethought. The existing loan on the existing property is fine, and continues exactly as it is. A second, separate borrowing for a different property, set up after 10 August, would be treated as a brand new arrangement, and a residential one will not be allowed, regardless of how well your existing loan has performed or how comfortable your fund is with the strategy.
“Honestly, if nothing needs to change, is there anything I should actually be doing right now?”
A few small things, yes, mostly to make sure your paperwork matches what the law now expects of you, rather than because anything urgent is at risk. None of these are complicated, and none of them need to happen this week, but they are worth working through over the next month or two while the change is still front of mind.
A Few Things Worth Doing This Month
- Pull out your bare trust deed and loan agreement and check they are both current, correctly signed, and describe the arrangement accurately. Grandfathering protects you, but only if your records clearly show what you actually have in place.
- Hold off on refinancing until you have had a specific conversation with an adviser about your fund, even if a lender is offering you a good rate right now, and even if you suspect that offer might not be around for long.
- If you are also planning any changes to your corporate trustee, a member’s account, or the fund’s investment strategy, mention the existing LRBA to whoever is helping you, so nothing gets restructured in a way that could accidentally be read as touching the arrangement itself.
- Keep your rental statements, valuations, and improvement records in good order. This matters for your fund regardless of the LRBA changes, particularly with a broader capital gains tax valuation deadline approaching for property more generally in mid 2027.
- If your loan is a related party arrangement, double check the interest rate and loan to value ratio still sit within the Tax Office’s safe harbour terms. This has always mattered, and it still does now.
None of this is about protecting yourself from a threat. It is closer to good housekeeping, the kind of thing worth doing whenever a law around you changes, even when your own situation is not actually affected by it. A little bit of tidying up now is far easier than trying to reconstruct paperwork later if a question ever comes up about exactly when your arrangement was put in place, and it means you can stop thinking about this and get back to the parts of managing your fund that actually need your attention.
If you would like a second set of eyes on your fund’s paperwork now that the rules have actually changed, or you simply want someone to confirm in plain language that your arrangement is one of the ones being left alone, that is exactly the kind of thing our SMSF team looks over for clients every week. A short conversation is usually all it takes to put your mind at rest, and it is a far better use of an afternoon than trying to interpret Senate press releases yourself.