Australia’s self-managed super fund property lending market split in two on 10 August 2026. New residential SMSF property loans stopped. Existing loans stayed grandfathered, refinancing remains possible, and commercial SMSF lending continues untouched. The gap between what’s banned and what’s still available tells you how lenders are repricing superannuation-backed property risk, and which borrowers now pay more to access credit outside the major banks.
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 ended new limited recourse borrowing arrangements for residential property inside SMSFs. The change followed a 45-day scramble as borrowers raced to exchange contracts before the cut-off. For the subset of SMSF trustees who used gearing to acquire investment properties, estimated at around 5-6% of all SMSFs, holding roughly $30 billion in LRBAs according to ATO data from 2023, the reform closed the new-loan door but left the refinance window open.
That distinction matters. Refinancing an existing SMSF loan keeps the same regulatory treatment and same collateral structure. What changes is the lender’s appetite and the rate they charge. Major banks largely exited SMSF lending before the ban, citing compliance cost and capital treatment. Non-bank lenders, who historically wrote a larger share of SMSF loans, now hold the refinancing pipeline and the commercial SMSF lending book that the reform didn’t touch.
Where SMSF lending moved, not where it disappeared
Residential SMSF lending is closed to new borrowers. Commercial SMSF lending, warehouses, retail shops, small office buildings, remains open because the reform targeted residential property specifically. For a non-bank lender, that shift changes the pipeline but not the total addressable book. A borrower who would have used super to buy a rental house in 2025 might now consider a small commercial premises instead, if the rental yield and tenant quality stack up.
The refinancing opportunity is larger. Existing residential SMSF loans that were written before August 2026 can be refinanced as they come off fixed terms or as borrowers shop for better rates. That’s a captive market: the borrower can’t move the loan into a standard residential mortgage because the property sits inside the super fund structure, and they can’t take out a new SMSF loan to replace it because new residential LRBAs are banned. They can only refinance the existing arrangement with a lender willing to write SMSF loans under the grandfathering rules.
Non-banks positioned for that refinancing wave are effectively competing for a closed pool. The risk is pricing power without competition. If only a handful of lenders offer SMSF refinancing, the borrower has limited options and rate discipline weakens.
The serviceability question: how lenders assess super-backed loans differently
SMSF loans sit outside standard serviceability tests because the borrower is the super fund, not an individual. Rental income from the property services the loan, and the fund’s cashflow, contributions, investment earnings, pension payments, determines the buffer. Lenders who stayed in SMSF lending after the majors pulled out typically apply higher interest rate buffers (often 2.5-3% above the loan rate, compared to 3% for standard mortgages) and shorter loan terms (25-30 years maximum, sometimes capped at borrower age plus loan term equals 70-75).
Post-reform, those settings are tightening further. A 1% serviceability buffer, offered by some non-banks as a competitive edge before August, is being wound back. Loan terms are shortening toward 25 years as lenders reprice longevity risk in a closed market. The 40-year loan term mentioned in some lender marketing materials applies to non-SMSF lending, not super-backed deals, where the fund’s wind-down timeline imposes a natural ceiling.
For a borrower refinancing in 2027 or 2028, that means higher repayments or lower borrowing capacity than the original loan offered, even if the property value held steady.
The catch
- Refinancing an SMSF loan is possible, but the new rate and terms might be worse than the original deal, fewer lenders, less competition, tighter buffers.
- Commercial SMSF lending remains open, but commercial property carries vacancy risk, lease break risk, and lower liquidity than residential.
- Non-bank lenders have pricing power in a captive refinancing market with limited alternatives.
- A borrower inside an SMSF structure can’t easily exit, selling the property and moving the proceeds into a different super investment triggers CGT inside the fund at 10% (if held 12+ months) or 15% (if sold earlier), plus potential stamp duty if the property transfers out of the fund.
Who this pricing shift hits hardest
SMSF property loans were historically used by two groups: high-net-worth individuals using super as a tax-effective vehicle to acquire investment property, and self-employed borrowers who couldn’t meet standard PAYG income tests but had strong super balances and rental income. The first group has alternatives, they can buy property outside super or use other investment structures. The second group is more constrained.
If a self-employed borrower with $400,000 in super and a rental property inside the fund comes off a fixed-rate SMSF loan in 2028, their refinancing options are limited to non-banks who stayed in the market. If those lenders reprice the loan at 200 basis points above the standard variable rate, not unusual for non-conforming or low-doc lending, the borrower is stuck paying the margin or selling the property and crystallising CGT and potential capital loss.
That’s not a liquidity crisis, but it’s a repricing of risk that falls hardest on borrowers with the least negotiating leverage.
What comes next for SMSF lending, and what’s still unclear
The residential SMSF ban is permanent unless future legislation reverses it. Commercial SMSF lending will continue as long as lenders see acceptable risk-adjusted returns. The refinancing market will stay active for the next 5-10 years as existing loans roll off fixed terms, then taper as properties are sold or borrowers wind down their funds.
What’s unclear is how lenders will treat SMSF loans as the borrower ages. A 55-year-old borrower with a 25-year loan term in 2026 will be 80 when the loan matures. Lenders historically required the loan to be repaid before the borrower reached pension age or the fund entered pension phase, but enforcement was inconsistent. Post-reform, that’s likely to tighten, expect more lenders to cap loan terms at borrower age 70-75, which shortens the term and increases repayments.
For commercial SMSF lending, the risk is tenant default and vacancy. A warehouse or small retail premises might generate a 6-7% gross yield, but if the tenant breaks the lease or the property sits vacant for six months, the fund’s cashflow drops and the loan becomes unserviceable. Unlike residential property, commercial tenants are harder to replace quickly, and lease incentives (fit-out contributions, rent-free periods) eat into net returns.
If you’re holding an SMSF loan or considering a commercial SMSF deal, the decision tree is: can the fund service the loan if rental income drops 20-30% for 6-12 months? If not, what’s the exit plan, sell the property, inject personal funds (not allowed under super rules), or default and trigger the limited recourse terms (lender takes the property, borrower loses the super balance tied to it, but personal assets stay protected)?
The broader implication: gearing inside super is harder, not impossible
The SMSF lending ban didn’t kill property investment inside super funds, it killed one specific financing structure. A trustee can still buy property inside an SMSF with cash (no loan), or use super to invest in unlisted property trusts, REITs, or commercial syndicates. What’s gone is the ability to lever up inside the fund using borrowed money secured against the property itself.
That removes a tax arbitrage: borrowing inside super at a low effective tax rate (investment earnings taxed at 15%, capital gains at 10% if held 12+ months) to acquire an appreciating asset that would otherwise sit outside super and face full marginal tax rates. The government’s stated rationale was that super is for retirement savings, not property speculation. The practical effect is that SMSF property investment is now limited to trustees with large existing balances who don’t need leverage.
For brokers and investors, the shift is less about what disappeared and more about what’s repriced. Refinancing an SMSF loan is possible but expensive. Commercial SMSF lending is open but riskier. And the major banks, who used to anchor pricing and set serviceability norms, are gone, leaving a smaller group of non-banks with more pricing power and less competitive pressure.
If you’re refinancing an SMSF loan in the next 24 months, compare at least three non-bank lenders and pressure-test the cashflow if the new rate is 1-2% higher than your current deal. If you’re considering a commercial SMSF loan, model the downside scenario where the property sits vacant for 12 months and the fund has to service the loan from contributions and investment earnings alone. And if you’re advising a client who’s locked into an SMSF loan structure, walk through the exit options now, because the refinancing market will get tighter, not easier, as the pool of active lenders shrinks further.
For more on how rental income stacks up against capital risk in today’s market, see Rental yields climb toward century highs, but income growth or capital risk?
Want the weekly signal on credit conditions, policy shifts, and what’s repricing across property finance? Subscribe to the newsletter.
General info, not financial advice.
