Can you buy property through an SMSF in 2026? What’s actually allowed

Investing in property through a Self-Managed Super Fund (SMSF) remains one of the most discussed strategies among Australian investors aiming to take greater control of their retirement savings. As we enter 2026, the answer to “can you buy property through an SMSF?” remains yes, but it comes with strict rules, compliance obligations, and practical limits that every trustee must understand before proceeding. Self-managed super funds are governed by the Superannuation Industry (Supervision) Act and enforced by the Australian Taxation Office (ATO), requiring trustees to act in accordance with superannuation law and the sole purpose test at all times.

In essence, your SMSF can own property, but it must be genuinely for retirement purposes only — no personal use, no family leases, and adherence to strict investment restrictions. If you’re unsure whether SMSF property investing fits your retirement strategy, understanding what’s allowed, what’s prohibited, and how to comply is crucial.

Understanding SMSF Property Basics in 2026

An SMSF can invest in property as part of its investment strategy, provided the property meets all legal requirements. This includes owning the property outright or borrowing to acquire it under a Limited Recourse Borrowing Arrangement (LRBA). Borrowing is not prohibited, but it must meet specific conditions under superannuation law and be structured correctly

What Property SMSFs Can Buy

Your SMSF can legally purchase:

• Residential investment property, provided it remains purely for investment and meets the sole purpose test
• Commercial property, including retail shops, offices, or industrial assets
• Overseas property, subject to local legal feasibility and the fund holding clear legal title

However, owning property through your SMSF doesn’t mean you have free rein to use it however you want — compliance with super law dictates what you can and cannot do.

Key Rules You Must Follow in 2026

1. The Sole Purpose Test

• Any property acquired must be held solely to provide retirement benefits to members, not to deliver present-day benefits. This means: Trustees and related parties cannot live in the SMSF-owned property
• You cannot rent to yourself, family, or related parties unless it meets strict commercial criteria (only permissible for commercial property on market terms)
• Failing the sole purpose test can result in compliance breaches, taxes, or even disqualification of the SMSF trust.

 

2. Arm’s-Length and Related Party Rules

The ATO prohibits SMSFs from acquiring assets from related parties unless specific exceptions apply (e.g., business real property purchased at market value). In practice:

• Residential property cannot be bought from a member, their relatives, or related entities. 
• Commercial property can be purchased from a related party if transacted on arm’s-length terms and market value
• Related party transactions are heavily scrutinized, and non-arm’s-length deals can trigger tax penalties under Non-Arm’s-Length Income (NALI) rules.

 

3. Borrowing via an LRBA

• Borrowing within an SMSF is permitted only through a Limited Recourse Borrowing Arrangement. LRBAs limit the lender’s recourse to the asset itself if the SMSF defaults, protecting other fund assets. You cannot borrow in any other way
• LRBAs also come with safe harbour interest rates set annually by the ATO as benchmarks to ensure loans are on commercial terms. For the 2025–26 year, safe harbour rates dropped slightly, reflecting broader lending conditions

 

4. In-House Asset Rules

• SMSFs are restricted from holding more than 5% of their total assets in in-house assets — investments in related parties or loans to them. Property leased to a related party falls into this category unless exceptions apply

Things You Cannot Do in Your SMSF

Despite the flexibility, SMSFs cannot:

• Use the property as a place to live, even temporarily
• Rent the property to family members or related parties (residential)
• Buy your existing personal property into the SMSF, even for fair market value
• Use borrowed money outside of an LRBA structure

If you fall foul of these rules, your fund could lose its concessional tax treatment or even be deemed non-complying.

Is SMSF Property Investing Worth It in 2026?

Property inside a super fund has appeal due to potential long-term capital growth and tax-effective income, but it isn’t without challenges. Property is a highly illiquid asset, meaning it can take time to sell if the fund needs cash quickly, which is a common concern for trustees nearing retirement

Experts generally recommend a minimum SMSF balance of around $200,000–$300,000 before considering property investment to ensure you have enough funds to cover purchase costs, ongoing expenses, and loan buffers.

Before investing in property, trustees should prepare a robust SMSF investment strategy that considers liquidity, diversification, risk tolerance, and retirement timing — a requirement under super law that must be documented and reviewed

Comparison Table: What’s Allowed vs Not Allowed for SMSF Property in 2026

Category	Allowed	Not Allowed
Property Ownership	Residential & commercial property	Personal homes for living
Party Transactions	Arm’s-length commercial property from related parties	Residential property from related parties
Borrowing	Using an LRBA	Standard personal loans
Renting	To unrelated tenants	To family/related parties (residential)

 

Internal Resources to Help You Decide

If you’re considering SMSF property investing and want a clear, step-by-step guide to compliance, risk management, and strategy, our SMSF Playbook can walk you through everything you need

For personalized one-on-one advice tailored to your financial situation and retirement goals, speaking with an expert can make a huge difference

Frequently Asked Questions (FAQ)

1. Can my SMSF buy residential property in 2026? Yes — an SMSF can buy residential investment property if it meets all legal requirements, including the sole purpose test and arm’s-length purchase price
2. Can I rent SMSF property to my family? No — residential property cannot be rented to family members or related parties unless it’s commercial property leased on market terms
3. Do I have to use an LRBA to borrow for property? Yes — SMSF borrowing must be structured as an LRBA to comply with super law
4. Is there a minimum SMSF balance to buy property?  There’s no legal minimum, but experts recommend having at least $200,000–$300,000 to cover costs, buffers, and risks
5. What happens if my SMSF breaches property rules? Your fund could lose concessional tax treatment, incur fines, or be deemed non-complying — making compliance essential from day one

External References:

1. Unlocking your super: The complete guide to buying investment property with superannuation
2. Self Managed Super Fund (SMSF)
3. Can I Buy Residential Property In My SMSF? The Complete Guide
4. Understanding SMSF Investment Rules and Regulations: What You Can (and Can’t) Do
5. Create your SMSF investment strategy
6. SMSF Property Rules: What You Can and Cannot Buy