SMSF property contracts must beat 10 August 2026 borrowing ban

Trustees using self-managed super funds to buy residential property with borrowed funds have until 10 August 2026 to have a valid contract in place, not just a settlement date. Titlespace says the new law will grandfather contracts entered before the deadline, but rushed or incorrectly structured deals could still fail compliance checks.

Why it matters: - SMSF trustees planning to use borrowed funds for residential property purchases have a hard deadline of 10 August 2026. - The new rules change whether a fund can enter new limited recourse borrowing arrangements for residential property. - Missing the deadline can remove the ability to borrow for that purchase, even if settlement happens later.

What happened: - The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 received Royal Assent on 26 June 2026. - The legislation starts 45 days later, on 10 August 2026. - Conveyancing firm Titlespace is warning trustees that the contract date, not the settlement date, determines whether an SMSF property purchase is caught by the ban. - Titlespace founder Daniella Muzitano said, "It's the contract, not settlement, that beats the clock."

The details: - A contract of sale validly entered into before 10 August 2026 is grandfathered under the transitional rules. - Settlement can occur after 10 August 2026 if the contract was validly entered into before commencement. - Existing SMSF borrowing arrangements are also grandfathered and are not unwound by the change. - The ban applies to new residential property borrowing only. - Commercial property is not affected. - SMSFs may still refinance existing residential LRBAs. - The SMSF must be correctly structured from the outset, including how the buyer is recorded on the contract. - Errors in the buyer name or structure are difficult to fix after signing. - The fund's borrowing structure, including the LRBA and related arrangements, should be in place before contracts are exchanged. - Titlespace says the contract should be professionally reviewed before signing, not after. - Titlespace handles the conveyancing and contract-of-sale side of SMSF property purchases. - The firm's role is alongside the client's accountant and financial adviser, who establish the borrowing structure. - SMSF buyers can get a fixed-fee conveyancing quote from Titlespace.

Between the lines: - The timing pressure is likely to push trustees toward faster decisions, which increases the risk of compliance mistakes. - Muzitano said a rushed contract can be a trap because SMSF purchases involve more moving parts than an ordinary property deal. - The warning reflects a practical issue as much as a legal one: a valid contract matters more than a late-stage settlement scramble. - Whether an SMSF borrowing arrangement is appropriate remains a matter for the fund's licensed financial adviser.

What's next: - Trustees who want to proceed with an SMSF residential property purchase using borrowed funds need to have contracts reviewed and signed before 10 August 2026. - Advisers, lenders and conveyancers will need to coordinate before contracts are exchanged. - Buyers who miss the commencement date will not be able to use a new LRBA for that purchase. - SMSF investors needing contract review before the deadline are being directed to Titlespace for conveyancing support.

The bottom line: - For SMSF residential property purchases using borrowed funds, the contract deadline is the real cutoff. - Settlement timing no longer protects a deal if the contract is not validly entered into before 10 August 2026.