SMSF Lending ban – 5 Key Questions Answered

During July, the ALP and the Greens struck a deal which shocked many to close the limited recourse borrowing arrangement (LRBA) exemption for self-managed superannuation funds. This move shocked many as banning SMSF loans or SMSF Property was not on the agenda. 

The May budget and the negative gearing changes have changed the property landscape and the recent announcement of the SMSF lending ban was a nail in the coffin. Its safe the say that the impact of SMSF Property loans has been underestimated, with non banks providing over 16000 SMSF Property loans last year as compared to the Government modelling of 4000 which h will lead to a greater impact on the property market than expected – not only property values but the fact that at least 16000 less properties will be available for rent – not a great move in a cost of living crisis where property vacancy rates are the lowest ever. The ban on SMSF property loans will just worsen the housing crisis.

So what do you need to consider before rushing to buy a SMSF property before 10 August 2026

1. What’s your SMSF investment Strategy?

Its important to consider your investment strategy before rushing to the deadline, its not just about beating the ban on SMSF Property lending – rather how does investing in SMSF Property fit within your overall investment mix.

       2. Who are you buying from?

Since the SMSF Property lending ban was announced the spruikers have been out – as SMSF Property leaders, Redwood has received many calls from the spruikers. Ensure you do the due diligence before you buy to ensure the price of the property stacks up.

Further, it is important to understand the SMSF rules, that is for residential property you cannot acquire an asset from a related party and you cannot transfer your residential property into a SMSF.

       3. Seek advice before buying

You need a good team around you so you don’t rush and buy a SMSF property without ticking all the boxes. For instance, your SMSF and SMSF Trustee and Bare Trustee  must be established prior to signing a contract of sale. Further you will need to consider the name on the contract as well as the timing of the SMSF rollover to the fund in order to pay the deposit.

       4. Not ready by 10 August 2026 but you have set up an SMSF

You may rush and set up an SMSF however not sign a contract of sale before 10 August 2026 leaving you without an investment strategy and a large set up cost for the SMSF setup. You will then need to consider an alternate strategy such as SMSF Commercial Property or other assets. 

      5. Contact a SMSF Broker to secure a SMSF Loan

Its important to understand if you can afford to purchase a property – best to seek advice from a SMSF broker before entering into a contract of sale. SMSF lending is specialised – mainly from small banks or non-banks. Servicing is based on contributions to the SMSF as well as rental income so its best to have servicing checked by a SMSF broker.

These changes were announced with zero consultation so SMSF professionals are still navigating the space and it’s important to take your time before you panic and sign a contract of sale before the deadline. 

Disclaimer – The content has been prepared by Redwood Advisory Pty Ltd without taking account of the objectives, financial situation or needs of a particular individual and does not constitute financial product advice. This article should not be considered personal financial advice as it is intended to provide factual information only.