If you hold property inside a Self-Managed Super Fund — or you’ve been considering it — 2026 has brought the biggest change to the rules in almost two decades. At Hudson Financial Partners, we’re seeing this play out directly with our Private Wealth clients, many of whom built their SMSF strategy around exactly the pathway that has now closed.
Here’s what’s actually changed, what hasn’t, and what we think trustees and business owners should be doing about it.
The Residential LRBA Pathway Has Closed
From 10 August 2026, SMSFs can no longer enter into new Limited Recourse Borrowing Arrangements (LRBAs) to buy residential property. This was the structure that let a fund borrow to purchase a property while limiting the lender’s recourse to that specific asset — the mechanism that made gearing into direct residential property inside super possible in the first place.
What this means for you:
- New residential LRBAs are no longer available. Unless contracts were exchanged under a valid borrowing structure before the cut-off, this pathway is now closed.
- Existing LRBAs are grandfathered. If your fund already holds residential property under an LRBA, nothing changes for you. You can continue making repayments and, in most cases, refinance on normal commercial terms.
- Commercial property is untouched. Business real property — premises used wholly and exclusively in a business — can still be acquired through an LRBA. For business owners, this remains a genuine and arguably more attractive strategy now.
- Cash purchases were never affected. An SMSF can still buy property outright, residential or commercial, using fund cash. No borrowing required, no change to this option at all.
The core tax case for property inside super hasn’t weakened — 15% tax on income in accumulation phase, 0% in pension phase, and CGT concessions all remain. What’s gone is the ability to lever into a new residential purchase using super’s own dollars.
Division 296 Raises the Stakes for Larger Balances
Sitting alongside this is Division 296, the new tax on earnings attributable to super balances above $3 million, which passed the Senate in March 2026. The first ATO assessments arrive after 30 June 2027 — but the modelling needs to start well before then, especially if your fund holds property.
Why? Because Division 296 is calculated on earnings, including unrealised gains, and a fund holding an illiquid asset like property may not have the cash on hand to pay the resulting liability without selling down other assets — or the property itself. This is precisely the kind of scenario where SMSF strategy, tax planning, and estate structure need to be reviewed together, not separately.
Why This Matters Most at the Private Wealth End
For a straightforward balance, none of this is urgent. But for our Private Wealth clients — those with $3 million-plus super balances, business real property inside their fund, or multi-generational estate structures — these changes compound quickly. The risk was never picking the wrong property; it’s the structure around everything: tax, entities, estate, borrowing and compliance, all interacting.
This is exactly why our Private Wealth service puts two senior advisers on every file. Decisions like these — LRBA positioning, Division 296 exposure, SMSF cost base — rarely sit neatly with one person’s expertise, and getting them wrong is expensive.
What We’re Recommending Clients Do Now
- Check the status of any existing LRBA. Grandfathered arrangements are protected, but refinancing and construction contracts mid-stream need careful handling.
- Reassess residential property strategy inside super. With new residential LRBAs closed, cash-funded purchases, co-ownership, or holding growth assets outside super may now suit some clients better.
- Revisit business real property plans. If you’re a business owner who hasn’t yet brought your commercial premises into your SMSF, the LRBA pathway for business real property is still fully available.
- Model your Division 296 exposure now. Don’t wait for the first assessment. If your balance is approaching or exceeding $3 million, scenario modelling should already be underway.
- Review everything together. SMSF, tax, lending and estate decisions need to be made as one strategy, not four separate ones.
Talk to Us
If your SMSF holds property, or you’ve been weighing it up, now is the time for a proper review — not a reactive one after the first Division 296 assessment lands. Our Division 296 specialist team offers structured, fixed-fee modelling, and our Private Wealth service is built specifically for clients where these decisions interact.
Book a complimentary consultation or learn more about Hudson Private Wealth and our Division 296 advice.
Visit Hudson Financial Partners to explore all of our advisory services.
This article is general in nature and does not take into account your personal objectives, financial situation or needs. Hudson Financial Partners is a trading name of Mainview Securities Pty Ltd, AFSL 241177. Please seek personal advice before acting on any of the strategies discussed above.
