Self-managed super funds can hold both direct property and shares, though each asset class carries its own compliance requirements. Recent changes to borrowing rules for residential property have reshaped what is achievable inside a fund, while share investing remains comparatively straightforward. Understanding the current rules for both asset classes helps trustees build a fund structure that will hold up under scrutiny.
Direct property and listed shares remain the two most common asset classes trustees consider when building an SMSF portfolio, and both are permitted, subject to specific rules that have shifted meaningfully in 2026. Understanding if an SMSF can invest in property and shares at the same time, and under what conditions, is the starting point for any trustee weighing up their options.
How to Invest in Shares through an SMSF?
Investing in listed shares through an SMSF is comparatively straightforward. Trustees can buy shares, exchange-traded funds and managed funds through a broking account held in the fund’s name, provided every transaction is made at market value and fits within the fund’s documented investment strategy. Listed shares are also one of the few assets an SMSF can acquire from a member or other related party, provided the transfer occurs at market value.
Borrowing to buy shares is a different matter. SMSFs are generally prohibited from borrowing, so a standard margin loan is not available. A limited recourse borrowing arrangement can technically be used to acquire listed shares, though few lenders offer this in practice.
A documented investment strategy should specifically address diversification, liquidity and risk when a fund holds a meaningful share portfolio, since the ATO expects the strategy to genuinely reflect the fund’s actual investment approach rather than a generic, boilerplate document.
How to Invest in Property through an SMSF in 2026?
Property investment through an SMSF has traditionally relied on a limited recourse borrowing arrangement (LRBA), a structure that allows a fund to borrow to acquire a single asset held in a separate holding trust, with the lender’s recourse limited to that asset if the loan defaults. While the loan is in place, the property can be repaired and maintained but not improved.
From 10 August 2026, a new LRBA can only be used to acquire real property if that property is business real property, broadly meaning land and buildings used wholly and exclusively in a business, whether run by a member or an unrelated tenant. Residential property generally does not meet this definition, so SMSFs can no longer borrow to acquire a residential property under a new arrangement.
The change followed the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which received royal assent on 26 June 2026 as part of a broader agreement between the government and the Australian Greens. Existing residential LRBAs entered into before 10 August 2026 are grandfathered and continue under the previous rules, as are purchases under a binding contract of sale signed before that date. A loan pre-approval alone does not qualify. Refinancing an existing residential arrangement remains permitted, though trustees should confirm the conditions before restructuring or increasing the loan.
What This Means in Practice
- A fund can still buy residential property outright with cash, provided it is not acquired from a related party and is not lived in or rented by a member or related party.
- New borrowing arrangements for real property must now be for business real property, such as commercial premises used in a business, including a member’s own business.
- Existing residential loans arranged before 10 August 2026 continue under the old rules and do not need to be unwound.
- Borrowing for business real property is unaffected by the change.
SMSF Investment Options in Property and Shares: Comparing the Two Paths
| Feature | Shares | Property |
|---|---|---|
| Borrowing available | Generally prohibited; an LRBA is possible but rarely offered | Limited to business real property for new arrangements from 10 August 2026 |
| Buying from a related party | Listed shares permitted at market value | Only business real property, at market value |
| Liquidity | Generally high, can be sold quickly | Low, can take months to sell |
| Diversification | Straightforward across sectors and geographies | Concentrated in a single asset |
| Ongoing costs | Brokerage and fund administration | Rates, maintenance, insurance and property management |
| Related party leasing | Not applicable | Business real property only, at market rent |
Weighing property against shares always comes down to a fund’s specific circumstances, which is exactly what Rivkin SMSF works through with trustees directly, including how the 2026 borrowing changes affect what is actually achievable. If you need an SMSF setup service that gets this structure right from the outset, our specialists are ready to walk through your options before you commit to either path. Get in touch with us to learn more!
SMSF Property and Shares Investment Rules: The Common Threads
Regardless of asset class, every SMSF investment must satisfy the sole purpose test, meaning it exists to provide retirement benefits rather than a present-day benefit to a member or their relatives. Transactions must also be conducted at arm’s length and at genuine market value. Related party dealings need particularly careful attention, since an SMSF is generally prohibited from acquiring assets from a related party at all. The main exceptions are listed securities and business real property, each acquired at market value.
Trustees also need to keep the in-house asset test in mind. Loans to, investments in, and fund assets leased to related parties are capped at five per cent of total fund assets. Business real property leased to a related party under a legally binding lease is excluded from this limit, but residential property leased to a related party is not, and would also breach the sole purpose test.
Tax Considerations for SMSF Property and Shares
Both asset classes benefit from the concessional tax environment that applies inside superannuation, though the practical detail differs between them. Rental income and dividends are generally taxed at 15 per cent while a fund remains in accumulation phase, and income on assets supporting a retirement phase pension is generally tax-free, subject to the transfer balance cap.
Members with a total super balance above $3 million should also factor in Division 296 tax, which applies from 1 July 2026. It is an additional personal tax on earnings attributable to the balance above that threshold, including earnings on pension-phase assets, although gains accrued before 1 July 2026 are excluded.
Capital gains also receive concessional treatment, with a one-third discount available where an asset has been held for at least twelve months, giving an effective rate of 10 per cent in the accumulation phase. Property transactions typically carry additional costs, including stamp duty and conveyancing fees that do not apply to a share purchase, which is worth factoring into any comparison beyond the headline tax rate alone.
Structuring a Fund That Holds Both Property and Shares
Where a fund plans to hold both asset classes, the administrative side of the structure deserves as much attention as the investment decision itself. A broking account for shares is generally straightforward to set up in the fund’s own name, while a property acquired through an LRBA requires a separate holding trust. A corporate trustee for both the SMSF and the holding trust is not legally required, but is generally recommended to keep the structure administratively manageable.
Cash flow planning becomes more important once a fund holds an illiquid asset such as property alongside a share portfolio. Rates, insurance, maintenance and any loan repayments must be met from the fund’s available cash, since a fund cannot sell off a portion of a house to cover a rates notice the way it might sell a parcel of shares. Maintaining a reasonable cash and share buffer helps a fund meet pension payments and unexpected costs without being forced into a poorly timed sale.
The fund’s investment strategy should explicitly address how the two asset classes work together, covering liquidity needs, the concentration risk of a single property, and how the overall mix supports members toward and through retirement. A strategy that only mentions one asset class while the fund holds both is a common, avoidable compliance gap.
Can an SMSF Invest in Shares and Property at the Same Time?
Yes, and in practice many funds hold both asset classes as part of a diversified strategy. A fund is not required to choose one asset class over the other, though trustees should ensure the overall portfolio still reflects appropriate diversification and matches the fund’s documented investment strategy and the members’ risk tolerance.
Insurance Considerations for Both Asset Classes
Trustees must consider whether to hold life and total and permanent disability cover for members as part of the fund’s investment strategy. Some members hold this cover through the SMSF, while others keep it in a retail or industry fund. Either way, a fund holding an illiquid property needs enough liquid assets, typically cash or shares, to meet premiums, pension payments or a death benefit without being forced to sell the property at short notice.
Property held inside a fund should also carry building insurance, both to protect the fund’s asset and because lenders generally require it. Where the property is held under an LRBA, the holding trustee is the legal owner, so the policy should name the correct entities. A related party tenant’s own contents or business insurance does not cover the fund’s building.
Frequently Asked Questions
Can my SMSF still buy a residential investment property?
Yes, though from 10 August 2026 a new borrowing arrangement cannot be used to fund the purchase. A fund can still buy residential property outright using existing fund assets, provided it is not bought from or used by a related party.
What happens to my existing SMSF property loan?
Residential loans entered into before 10 August 2026 are grandfathered and continue under the previous rules, including the ability to refinance. Business real property loans are unaffected by the change.
Can my SMSF lease a commercial property to my own business?
Generally, yes, provided the property qualifies as business real property and the lease is conducted on arm’s length, market-rate terms.
Is share investing simpler than property for an SMSF?
In most respects, yes. Shares avoid the valuation complexity, high transaction costs, and liquidity constraints that come with direct property, though the right mix depends on each fund’s specific goals.
Can an SMSF hold property and shares through a single accountant or administrator?
Yes, and most SMSF administration providers handle both asset classes as part of the same annual compliance work, including preparing financial statements, coordinating the independent audit and lodging the fund’s annual return.
Conclusion
Both property and shares remain available to SMSF trustees, though the path for each looks different heading into the rest of 2026. Share investing continues largely unchanged, while new borrowing for residential property is no longer available, with business real property now the only real property eligible for a fresh limited recourse borrowing arrangement. Trustees weighing up either path should revisit their fund’s investment strategy against these current rules before committing capital.
Revisiting that strategy is far more productive with someone who tracks these rule changes for a living, which is exactly the role Rivkin SMSF plays for trustees navigating both asset classes. Get guidance from an SMSF specialist in Australia that trustees can rely on. Contact our team before you revise your fund’s investment strategy!
“This article is general information only. Whether an investment suits your fund depends on your circumstances, so professional advice should be obtained before acting.”
