- New SMSF limited recourse borrowing arrangements (LRBAs) for residential property are banned from Monday 10 August 2026.
- The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 passed both houses on 25 June 2026 and received Royal Assent on 26 June 2026. The ban commences 45 days after assent.
- Existing SMSF property loans are fully grandfathered, and the legislation preserves the right to refinance a pre-commencement borrowing.
- Contracts exchanged before 10 August 2026 are protected, even if settlement happens after that date. The contract date is the trigger.
- SMSF borrowing for business real property (commercial premises) continues unchanged, as do LRBAs over shares and managed fund units.
- SMSFs can still buy residential property with cash. Only the borrowing pathway is closing.
What actually happened
On 23 June 2026, Prime Minister Anthony Albanese and Treasurer Jim Chalmers announced that the Government would support a Greens amendment banning superannuation funds from entering new limited recourse borrowing arrangements for residential property. The amendment, moved by Greens Senator Nick McKim, was the price of Greens support in the Senate for the Government's wider tax package, the same bill that reworks the capital gains tax discount and negative gearing rules.
It moved fast from there. The Senate passed the amended bill on 25 June 2026 by 35 votes to 25, the House of Representatives agreed to the Senate amendments the same day by 98 votes to 39, and the Governor-General granted Royal Assent on Friday 26 June 2026. The LRBA restriction commences on the 45th day after assent, which lands on Monday 10 August 2026.
The actual legal change, in one sentence
The amendment adds a single new condition to section 67A(2) of the Superannuation Industry (Supervision) Act 1993: where the asset acquired under an LRBA is real property, that property must be business real property as defined in section 66 of the Act. Residential dwellings do not meet that definition because they are not used wholly and exclusively in one or more businesses, so the borrowing door closes on houses, apartments and units, whether newly built or established.
Note the precision here, because it matters in both directions. The test is business real property, not "commercial property". A residential property genuinely used wholly and exclusively in a business can still qualify. And some non-residential property, such as vacant land or mixed-use premises, may fail the test and also be excluded from borrowing. Anyone planning a commercial LRBA after 10 August should have the specific property assessed against the section 66 definition before signing anything.
What is banned and what is not
| Scenario | Status from 10 August 2026 | Notes |
|---|---|---|
| New LRBA to buy residential property | Banned | Applies to new builds and established property alike. No carve-out for new construction. |
| Existing residential LRBA | Protected | Fully grandfathered. Nothing changes for loans already in place. |
| Refinancing an existing residential LRBA | Allowed | The legislation preserves maintaining or refinancing pre-commencement borrowings. Like-for-like refinances keep grandfathered status; material changes (top-ups, equity release, asset changes) risk being treated as a new arrangement. |
| Contract exchanged before 10 August, settling after | Protected | The contract date is the trigger, not settlement. |
| SMSF buying residential property with cash | Allowed | The ban targets borrowing only, subject to the fund's investment strategy. |
| New LRBA over business real property | Allowed | Commercial premises used wholly and exclusively in a business. Verify against section 66; not all non-residential property qualifies. |
| New LRBA over shares or managed fund units | Allowed | The single acquirable asset rules continue unchanged for non-property assets. |
Why the Government did it
The Treasurer framed the measure as modest, telling reporters that SMSFs account for less than 1% of total residential property borrowing and less than half a per cent of new residential borrowing each year, with an expected revenue impact of roughly $50 million over the forward estimates. The Greens argued the change takes heat out of the housing market by stopping SMSF buyers competing with first home buyers.
The policy history runs deeper than the June deal. The borrowing exception itself only dates from 2007, with the current LRBA framework in place since July 2010. The Cooper Review flagged borrowing inside super as a concern in 2010, the Murray Financial System Inquiry recommended removing the exception entirely in 2014, and the Council of Financial Regulators raised it again in 2019 and 2022. Industry bodies including the SMSF Association have criticised the manner of the change, a late-stage Senate amendment without consultation, more than the direction.
There is a practical risk the market moves before the law does. When a similar ban was Labor policy in 2018 and 2019, the major banks withdrew their SMSF lending products well before any legislation existed. Some lenders may close residential SMSF applications or slow their pipelines ahead of 10 August. If you are mid-purchase, the binding constraint is probably your lender's cutoff, not the legal deadline.
What to do, by situation
You are mid-purchase or planning one
The contract date is everything. To be protected, contracts need to be exchanged before 10 August 2026, and the structure needs to be right: fund established, bare trust in place, finance approved. Bare trust setup and SMSF loan approvals each take weeks, not days, so the realistic drop-dead for starting a new transaction is well before the legal deadline. Speak to your financial adviser about whether the strategy still suits you, and get your finance moving in parallel.
You already have an SMSF property loan
Nothing changes, and do not let anyone panic you into restructuring. Your arrangement is grandfathered, and your right to refinance it is written into the legislation. That last point matters: if your existing SMSF loan rate starts with a 7, refinancing to a sharper lender remains on the table after the ban, and with new-loan volume ending, lenders will be competing for the existing book. A like-for-like refinance preserves grandfathered status; avoid material changes to the arrangement without advice.
You want property exposure in super going forward
Three paths remain: buying residential property outright with fund cash, borrowing for business real property (the established strategy of holding your business premises in your SMSF is untouched), or non-property LRBAs over shares and managed investments. Which of these suits your fund is a financial advice question for your licensed adviser and accountant; the lending side of whichever path you choose is where we come in.
SMSF lending is moving fast between now and 10 August
If you are mid-transaction and racing the deadline, need your existing SMSF loan reviewed for a refinance, or are looking at commercial property in your fund, John compares 50+ lenders and responds personally. Free service, paid by the lender on settlement.
Book a free consultation Call 02 8046 3933Frequently asked questions
When does the SMSF residential property borrowing ban start?
The ban commences Monday 10 August 2026, which is the 45th day after the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 received Royal Assent on 26 June 2026. Contracts entered into before that date are protected even if settlement happens later.
Does the ban affect my existing SMSF property loan?
No. The ban is prospective only. Existing LRBAs entered into before 10 August 2026 are grandfathered, and the legislation specifically preserves the right to maintain or refinance a pre-commencement borrowing. A like-for-like refinance to a different lender keeps grandfathered status, but material changes such as a top-up or a change of asset may be treated as a new arrangement.
Can my SMSF still buy residential property at all?
Yes, with cash. The ban targets borrowing only. An SMSF can still purchase residential property outright without a loan, provided the purchase fits the fund's investment strategy. What ends on 10 August 2026 is new borrowing (LRBAs) for residential property.
Can my SMSF still borrow to buy commercial property?
Yes. LRBAs remain available for real property that meets the definition of business real property in section 66 of the SIS Act, generally property used wholly and exclusively in one or more businesses. Not all non-residential property automatically qualifies: mixed-use property and vacant land may fail the test and need careful review before contracts are signed.
I have exchanged contracts but not settled. Am I caught by the ban?
No. The legislation protects acquisitions under arrangements entered into before commencement, even where settlement occurs after 10 August 2026. The contract date is the trigger, not the settlement date. If you are mid-transaction, confirm your bare trust and finance are correctly in place and speak to your adviser and lender without delay.
Will lenders stop offering SMSF residential loans before 10 August?
It is a real risk. When a similar ban was proposed in 2018 and 2019, the major banks withdrew their SMSF lending products before any legislation passed. Some lenders may close applications or tighten pipelines ahead of the deadline, so borrowers already in progress should not assume products stay available until the final day.
Related reading: the SMSF Property Loan Guide 2026, the SMSF Hub, and refinancing options for existing borrowers.