The Federal Government has supported an amendment that will prohibit Self-Managed Super Funds from entering into new Limited Recourse Borrowing Arrangements to acquire residential property. This amendment formed part of the agreement reached with the Greens to secure passage of the Government’s broader tax reform package, which passed Parliament on 26 June 2026.
A Limited Recourse Borrowing Arrangement, or LRBA, is a structure that allows an SMSF to borrow money to acquire an asset, commonly property. If the loan defaults, the lender’s recourse is generally limited to the asset purchased, rather than the broader assets of the SMSF. Once the amendment commences, SMSFs will no longer be able to enter into new LRBAs to acquire residential property. Existing SMSF borrowing arrangements will be grandfathered and can continue under the current rules.
Royal Assent was granted on 26 June 2026, meaning the amendment is expected to commence on 10 August 2026, 45 days later. This transition period is intended to allow transactions already underway to proceed. Where a contract of sale has been entered into before the commencement date, the legislation appears intended to allow the purchase to continue, even if settlement occurs after commencement. However, establishing an SMSF, arranging finance, or obtaining an approval in principle may not be enough if a contract has not been entered into before the commencement date.
Existing residential SMSF loans are not expected to be affected, and refinancing of existing residential property LRBAs remains permissible. However, SMSF trustees and advisers should await lender guidance before making assumptions about eligibility. The change also does not alter existing superannuation tax concessions, as it relates to borrowing arrangements rather than the tax treatment of superannuation investments.
The changes do not necessarily prevent SMSFs from using LRBAs to acquire business real property, such as some commercial properties. However, commercial zoning or mixed-use zoning does not automatically mean a property qualifies. The key question is whether the property meets the definition of business real property under the SIS Act, which depends on how the property is used. Anyone considering an SMSF property purchase or refinance should seek legal, accounting, financial and lending advice before proceeding.
Important disclosure: This article contains general information only and has been prepared without taking into account your individual objectives, financial situation or needs. It should not be relied upon as personal financial, tax, legal, superannuation or credit advice. Before making any decision in relation to SMSF borrowing, property investment, taxation, superannuation or lending matters, you should consider whether the information is appropriate for your circumstances and seek advice from a qualified accountant, tax adviser, solicitor, financial adviser and/or licensed credit adviser.