Well, it's official. After months of speculation, the government has banned SMSFs from borrowing to buy residential property. The change was part of the deal Labor struck with the Greens to get its tax package through the Senate, and it became law when the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June.
The new rules take effect on 10 August 2026 — which, as I write this, is only a week away. If you're mid-way through a purchase, that date matters enormously, so let's walk through exactly what's changing, what isn't, and what you may need to do before the deadline.
First, a quick refresher: what is an LRBA?
A limited recourse borrowing arrangement (LRBA) is the only way an SMSF can borrow to buy an asset. The asset — most commonly a property — is held in a separate holding trust, and if the fund defaults, the lender's recourse is limited to that single asset. The rest of your retirement savings stays protected.
Since LRBAs were introduced back in 2007, they've been a popular way for SMSF trustees to get into property, residential and commercial alike. It's the residential side that's now being switched off.
What's actually changing
From 10 August 2026, an SMSF can only enter a new LRBA over real property if that property is business real property — that is, property used wholly and exclusively in a business, such as commercial premises, industrial units, farms and the like.
In plain English: no new borrowing to buy houses, units, townhouses or any other residential property inside your SMSF — whether it's an established home or a brand-new build. The ban applies to arrangements entered into on or after 10 August 2026.
Key dates at a glance
| Date | What it means |
|---|---|
| 26 June 2026 | Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent |
| Before 10 August 2026 | New residential LRBAs can still be entered into, and contracts exchanged before this date are protected even if settlement happens later |
| From 10 August 2026 | New LRBAs can only be used to acquire business real property — residential is off the table |
What's not changing
This is where the news is better than the headlines might suggest. The legislation includes sensible grandfathering, and several important things stay exactly as they are:
- Existing residential LRBAs are protected. If your fund already has a loan over a residential property, nothing changes. You don't need to sell, restructure or pay the loan out early.
- Refinancing is still allowed. You can refinance a grandfathered LRBA to a new lender without losing its protected status. If your SMSF loan rate isn't competitive, shopping around is still very much on the table.
- Contracts exchanged before 10 August are safe. If you've signed a binding contract before the commencement date, the purchase can proceed under an LRBA even if settlement — and the loan itself — happens well after 10 August.
- Commercial property borrowing continues. LRBAs over business real property remain available. For business owners looking to hold their premises in super, the strategy is untouched.
- Buying residential property with cash is still fine. The ban is on borrowing, not on residential property itself. A fund with sufficient balance can still purchase a residential investment property outright, provided it stacks up under the fund's investment strategy and the usual rules.
Mid-purchase right now? Here's what to do
If your SMSF is currently in the process of buying a residential property with borrowings, the single most important thing is to exchange contracts before 10 August 2026. Settlement can come later — it's the binding contract date that locks in your position.
A word of caution from experience: don't assume you have until the last minute. When rules like this change, lenders tend to pull their SMSF loan products off the shelf early rather than risk writing a loan that falls foul of the new law. If your finance isn't approved yet, talk to your broker or lender this week, not next.
And if you can't get contracts exchanged in time? Don't force it. Rushing into the wrong property to beat a deadline is a far more expensive mistake than missing out on a borrowing structure. There are other paths — saving toward an outright purchase, commercial property, or simply investing elsewhere.
Our take
Whatever your view on the politics, the practical reality is straightforward: residential gearing in super is closing for new arrangements, existing arrangements are protected, and the window for in-flight purchases is measured in days, not months.
As always, the decision should never be driven by structure or deadlines alone. If any of this touches your fund — an existing LRBA, a purchase in progress, or plans you'd been sitting on — talk it through with a licensed financial adviser before you act, and make sure your fund's deed, investment strategy and paperwork are up to the job.
