Super borrowing rules are changing

Will the new superannuation borrowing rules affect your plans to purchase a medical practice?

The Federal Government has passed changes to limited recourse borrowing arrangements, with the new rules taking effect from 10 August 2026.

From that date, SMSFs will no longer be able to enter into new LRBAs to purchase residential property.

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"Good news for practice owners: SMSFs can still borrow to acquire qualifying business premises. So, while the rules are changing, your plans don’t have to."

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What does this mean for practice owners?

An SMSF may still be able to use an LRBA to purchase practice premises and lease them back to the practice on commercial terms.

It may also be possible for an SMSF to acquire business premises that are already owned personally or by another related entity. This can release equity from the property, although capital gains tax, transfer duty, valuation and superannuation contribution rules all need to be considered before proceeding.

Small business capital gains tax concessions may also be available in certain circumstances.

How does an LRBA work?

An LRBA allows an SMSF to borrow money to acquire a single asset, such as practice premises.

The property is held in a separate holding trust while the loan remains outstanding. The SMSF receives the rental income and benefits from any increase in the property’s value.

The arrangement is described as limited recourse because if the loan is not repaid, the lender’s rights are generally limited to the property acquired, rather than to the SMSF’s other assets.

However, lenders may still require personal guarantees, so the broader financial risks should also be considered.

Does the property qualify?

For an SMSF to acquire premises from a related party, the property must generally qualify as business real property.

A medical centre, consulting suite or other premises used to operate a medical practice will often meet this definition. However, not every property described as commercial will automatically qualify.

Additional care may be required where the property:

• Includes a residential component;

• Is used partly for private purposes;

• Is vacant or not yet being used in a business, or

• Has mixed uses or multiple occupants.

We recommend confirming the property’s eligibility before entering into any contract or finance arrangement.

What if you already have an LRBA?

Existing LRBAs are generally not affected by the new restrictions and may continue under the existing framework.

Refinancing may also remain available, although advice should be obtained before changing the lender, loan terms or ownership structure.

Understand the costs

Establishing an LRBA involves legal, lending and accounting costs, often totalling several thousand dollars.

There are also ongoing compliance requirements for the duration of the loan, including the separate holding trust, commercial leasing arrangements, annual SMSF accounting and audit obligations.

These costs should be weighed against the long-term benefits of holding the property within superannuation.

Considering purchasing your practice premises through your SMSF?

The new rules should not, by themselves, prevent medical practice owners from borrowing through an SMSF to purchase qualifying practice premises.

GrowthMD can assist with the tax, structuring and compliance aspects of the arrangement, including:

• Confirming how the proposed structure may operate;

• Considering the tax implications of transferring existing premises;

• Modelling the cash-flow and entity impacts; and

• Working alongside your solicitor, finance broker and licensed financial adviser.

Because establishing an SMSF and borrowing to purchase property are financial products and investment decisions, you should obtain personal advice from a licensed financial adviser before proceeding.

This article contains general information only and does not constitute financial or legal advice. GrowthMD is a registered tax agent and does not hold an Australian Financial Services Licence. Please obtain advice from a licensed financial adviser before making any investment decision, including borrowing through an SMSF.