Key Highlights

• An SMSF can generally have up to six members, and members usually must also be trustees or directors.

• Yes. The fund should use an account held in its own name for contributions, income and expenses.

• Yes. Trustees must formulate, regularly review and give effect to a written Investment strategy.

• An approved independent SMSF auditor must audit the fund before its annual return is lodged.

Australia's SMSF sector is large and still growing: ATO figures for the March 2026 quarter record more than 672,000 funds holding an estimated AUD 1.107 trillion in Assets across almost 1.24 million members. But the rules that govern setting up and running a fund have shifted materially this year. Some changes are already enacted law; others are Government announcements that still require legislation before they bind anyone.

For anyone considering a fund, the distinction matters. Below are seven developments to understand before you commit — each marked ENACTED LAW or PROPOSED/ANNOUNCED REFORM (or, for the regulator's activity, a REGULATORY DEVELOPMENT). None of this is personal advice; it is general information to help you ask better questions of a qualified professional.

1. Borrowing to buy residential property is now restricted (ENACTED LAW)

The biggest structural change concerns limited recourse borrowing arrangements (LRBAs). Under Schedule 5 of the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Royal Assent 26 June 2026), a new LRBA entered into on or after 10 August 2026 can only be used to acquire real property if that property is Business real property — broadly, property used wholly and exclusively in one or more businesses, as defined in the SIS Act 1993.

The practical effect is that residential property can no longer be acquired through a new LRBA. This is a restriction on new borrowing, not a ban on SMSFs owning residential property: a fund can still buy property outright with its own cash, subject to the usual rules. Existing residential LRBAs established before 10 August 2026, their refinancing, and binding contracts exchanged before that date are grandfathered.

2. Division 296 — extra tax on very large balances (ENACTED LAW)

Division 296, introduced by the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026, applies from 1 July 2026 (the 2026–27 income year). It imposes an additional 15% tax on the proportion of an individual's taxable Superannuation Earnings attributable to a total superannuation balance above AUD 3 million, and a further 10% above AUD 10 million.

Importantly, the enacted regime taxes an adjusted amount of the fund's actual (realised) Taxable Income — not unrealised gains, as an earlier proposal had suggested. The tax is assessed to the individual, not the fund, and the thresholds are indexed. For most new trustees this will not bite immediately, but it is worth understanding if you expect a large balance.

3. Mandatory Trustee education before registration (PROPOSED/ANNOUNCED REFORM)

On 19 August 2026 the Government announced a package titled "Protecting Consumers and the Promise of Superannuation." One measure would require mandatory trustee education prior to SMSF registration — a basic trustee knowledge requirement — alongside support for industry-led standards. This is an announcement, not law; Treasury has said it will continue consulting before legislating.

4. A new ATO power to prevent rollovers (PROPOSED/ANNOUNCED REFORM)

The same package proposes empowering the ATO to prevent rollovers into new SMSFs where it is investigating concerns of fraud, financial abuse, misconduct or potential harm. The measure responds to cases where consumers were encouraged to establish funds to facilitate problematic investments. It remains a proposal pending legislation.

5. Uniquely identifiable SMSF bank accounts (PROPOSED/ANNOUNCED REFORM)

The Government has also proposed requiring SMSFs to hold uniquely identifiable bank accounts, improving the ability of regulators to track fund money and detect misconduct. Again, this is announced rather than enacted, and the detail will emerge through consultation.

6. A higher supervisory levy (PROPOSED/ANNOUNCED REFORM)

The package proposes aligning the SMSF supervisory levy with fund establishment and increasing it for the first time since 2013, from $259 to $295. It is a modest sum, but it signals the direction of policy. As a proposal it is not yet payable at the new rate.

7. Auditors under closer scrutiny (REGULATORY DEVELOPMENT)

Every SMSF must be independently audited each year before lodging its annual return, and ASIC has stepped up oversight of the auditors who perform that work. In media release 26-170MR (24 July 2026), ASIC reported action against 64 approved SMSF auditors across FY26 — comprising 8 disqualifications, 3 suspensions, 10 sets of conditions and 43 registration cancellations. This does not imply the profession is broadly non-compliant; it underscores that the annual audit is a genuine gatekeeping check you will need to budget for and cooperate with.

Hypothetical example

Priya, 41, wants to start an SMSF partly to buy an apartment to rent out, using borrowing. Because any new LRBA from 10 August 2026 can only fund business real property, she cannot use a new Loan for a residential apartment. She could buy commercial premises via an LRBA, or buy residential property outright if the fund had the cash. She also notes that trustee education and a higher levy may apply in future if the August proposals become law.

Risks and mistakes to avoid

The most common error is treating announcements as settled rules — or vice versa. Four of the seven items above are still proposals. Another is assuming an SMSF is automatically cheaper or better than an APRA-regulated fund; running a compliant fund carries real administrative and audit obligations. Do not start a fund solely to pursue a single property purchase, and never rely on Marketing that promises guaranteed savings.

What to watch next

Keep an eye on Treasury's consultation and any legislation implementing the August 2026 package, ATO guidance on Division 296 reporting from 2026–27, and the ATO SMSF Newsroom for LRBA updates. Commencement dates and thresholds can change.

The bottom line

Starting an SMSF in 2026 means navigating two enacted changes — the residential LRBA restriction and Division 296 — plus a slate of proposals that could reshape registration, banking and levies. Understanding what is law and what is merely announced is the first discipline of a good trustee. Consider current official guidance and seek appropriately qualified financial, legal or tax advice for your circumstances.