“The rules say that an SMSF can only borrow to buy real estate if the real estate is ‘business real property’,” Hay-Bartlem said.
“Can you still buy residential real estate in my SMSF? This is a big ‘it depends’. There’s a whole lot of things we need to be aware of. First of all, it doesn’t create an absolute ban on buying real estate or residential real estate in your SMSF,” he said.
“Now the ‘business real property’ concept has been in the super laws for many, many years and it means real estate that is used wholly and exclusively in carrying on a business. This means if you’re going to borrow to buy real estate in an SMSF, you have to make sure the real estate is at the time you buy it ‘wholly and exclusively’ used in carrying on a business.”
Hay-Bartlem continued that some residential properties are actually used wholly exclusively in carrying on a business.
“That’s a tick. A commercial property which is vacant at the time you buy it may not be business real property. Part commercial, part residential probably won’t be. And if you’re buying residential real estate to convert to use for a different commercial purpose, it probably isn’t business real property,” he said.
“So, you have to be very careful when looking at buying real estate in your SMSF to make sure it’s not residential, but it’s ‘business real property’.”
He added that the legislation has been passed and is now considered an Act which received Royal Assent on 26 June 2026.
“We have 45 days from Royal Assent as a window, and that expires on 10 August 2026. So, the new rules are effective from 10 August 2026,” he said.
“Existing arrangements are actually carved out. Now the carve outs are going to relate to an existing borrowing, a refinance of an existing borrowing. However, there are limits on what a refinance is going to be. Or a purchase under an arrangement that existed before the cutoff date.”
He said this wouldn’t have an immediate effect but warned that extreme caution should be applied for any plans to go ahead with a residential real estate purchase with borrowings in an SMSF.
“You need to watch the cutoff dates and make sure you’re going to comply with those new rules,” he said.
