SMSF lending for residential property is over. Can micro industrial fill the gap?

What actually changed

The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026. From 10 August 2026, an SMSF can only use a new limited recourse borrowing arrangement, or LRBA, to buy real property if that property is business real property.

In plain terms: no new borrowing inside super for residential property.

What did not change:

• Loans entered into before 10 August 2026 carry on. Nothing needs to be sold or repaid early.
• Refinancing an existing pre-10 August loan is not caught, based on reported ATO guidance.
• A contract exchanged before 10 August is protected, even if it settles later.

Be careful with changes to an existing loan. Increasing it, switching to a related-party lender or replacing the asset can take it outside that protection. Talk to your SMSF adviser before you change anything.

What your SMSF can still buy

Three doors are still open.

Residential property, with cash. Your fund can still buy a house outright, as long as it meets the sole purpose test. You and your relatives still cannot live in it or rent it.

Business real property, with or without a loan. Offices, shops, factories and warehouses used wholly and exclusively in a business. Your fund can still borrow to buy these.

Business real property you already use. This is one of the few assets an SMSF can buy from a member and lease back to the member’s own business, at market rent backed by an independent valuation.

If your fund was relying on borrowing, the second door is the one that matters.

Why micro industrial is getting attention

Micro industrial means small warehouse and storage units, roughly 16 to 300 square metres, usually sold on strata title, so you own one unit in a larger complex.

Three things are pulling SMSF money towards it.

The entry price. Small storage and warehouse units start at prices a fund can reach without a large loan. In the projects below, storage starts from $117,000 and small warehouses from about $250,000.

The tenant. Small units suit trades, online retailers and small businesses that need space close to where they work. A unit leased to a business that uses it in that business can meet the business real property test, which is the test that matters if your fund borrows.

The market. Across Melbourne’s industrial market, vacancy was 5.0% in the June quarter of 2026, and lower again in the tighter pockets: 2.5% on the city fringe and 2.0% in the east. Prime rents rose 5.6% over the year (Knight Frank). Those figures track larger warehouses rather than small units, so treat them as the backdrop, not a promise for any single unit. In Sydney, agents were already reporting SMSF buyers moving into industrial strata in June, before the ban started (Ray White Commercial).

One example, worked through

Storre Cheltenham has units from $250,300, sold with a 6.3% leaseback from settlement.

At the entry price, 6.3% is about $15,770 a year in rent from the day the fund settles.

Two questions to ask before that number gets you excited:

• How long is the leaseback, and what happens to the rent when it ends?
• Who is the tenant behind the leaseback, and how strong is that business?

A leaseback is only as good as the tenant and the term. We will put both in writing for you before you go further.

The honest part

Micro industrial is not a like-for-like swap for a house. Here is what is different.

• When it is empty, it is empty. A vacant warehouse earns nothing. Check how long it would take to re-lease, and keep cash in the fund to cover a gap.
• Borrowing costs more and asks for more. Commercial SMSF loans typically lend 60 to 70% of the price. Rates were quoted between 7.09% and 9.95% in mid-2026, and many lenders want $300,000 or more already in the fund (Grow SMSF). Your broker will confirm your numbers.
• The business real property test has to hold for the whole loan. A unit leased to a business qualifies. A unit used for personal storage fails the “wholly and exclusively” test. If your fund borrows, the use has to stay commercial for the life of the loan.
• GST usually applies to commercial property, and your fund may need to register for it. Stamp duty depends on the state.
• Fewer buyers when you sell. The resale market for a single strata unit is smaller than for a house.

Who it suits, and who it does not

It tends to suit funds that want income on a known lease, have the cash for a 30 to 40% deposit plus costs, and are comfortable owning a business asset rather than a home.

It is probably wrong for you if your fund needs to borrow most of the price, if you are relying on capital growth in the next few years, or if the only reason is that you can no longer borrow for a house.

What we have available now

Kubed · Coburg North. Storage from $117,000. Warehouses from $582,000. 90 units, 16 to 94 sqm. Compact storage and small-format space for trades, online retailers and SMSF buyers.

Storre · Cheltenham. From $250,300, with a 6.3% leaseback from settlement. 19 units, 28 to 113 sqm.

Summit Park · Thurgoona (Albury). $297,233 to $996,214. 15 warehouses, 77 to 325 sqm. Built for the Albury-Wodonga business community, on a strategic trucking route.

Piper Park · East Bendigo. $309,245 to $689,372. 13 warehouses, 79 to 217 sqm. For Bendigo’s trade and logistics base, where a regional business can own rather than lease.

Coburg Industries Warehouse · Coburg North. From $716,000, office warehouses to $1,246,000. 34 spaces, 147 to 280 sqm. Showroom, warehouse and office space in Melbourne’s tightly held inner north.

See all our commercial stock: zammitrealestate.com.au/property-type/commercial

Talk to us before the money sits idle

If your fund was planning to borrow for a house, talk to us before that money sits in cash doing nothing. Reply, or call Mark on 0433 837 246, and we will walk through what your fund can buy now.

This article is general information, not financial, tax or legal advice. SMSF rules are complex. Speak to your SMSF adviser, accountant or broker about your fund’s situation before acting. Figures checked October 2026.

Sources: Treasury Laws Amendment (Tax Reform No. 1) Act 2026. Knight Frank, Melbourne Industrial State of the Market, Q2 2026. Grow SMSF, SMSF Commercial Property Loan guide, June 2026. Ray White Commercial, SMSF policy shift sparks early movement into industrial strata, June 2026.