On 23 June 2026, the Albanese government struck a deal with the Australian Greens to secure Senate passage of its broader tax reform package, and the price was a ban on SMSFs borrowing to buy residential property. Here’s what you need to know on these time-sensitive changes.
What is changing
The ban covers all residential property, including new builds and off-the-plan purchases. It is prospective, so existing arrangements are grandfathered and outright SMSF residential purchases remain permissible. Commercial property is excluded entirely. Parliament is expected to pass the legislation before rising on 2 July 2026, with the ban taking effect 45 days after royal assent, around mid-August 2026.
What the ban means in plain terms
- New limited recourse borrowing arrangements (LRBAs) to acquire residential property inside an SMSF, including new builds and off-the-plan purchases, will not be permitted after commencement.
- Existing residential LRBAs are fully grandfathered. There is no forced sale or refinance. One caution: do not refinance without specialist legal advice, as it may forfeit your grandfathered status.
- Outright residential purchases remain permissible. An SMSF can still buy residential property using its own capital. Only the borrowing component is banned.
The 45 day window: what it means if you are mid-process
The 45 day transition period after royal assent exists specifically to allow investors who are mid-stream on a residential LRBA purchase to complete. The relevant trigger for grandfathering is the contract date, not settlement, so if you are part-way through a purchase, exchanging contracts before the ban commences is the priority.
Investors should also be aware that lending policy may shift before the formal commencement date. When the major banks previously retreated from SMSF lending, lenders pulled products well before any formal deadline. Westpac withdrew in July 2018, CBA in October 2018, and NAB had exited in 2015. Confirm lender availability now and seek professional advice specific to your situation.
Commercial property is unaffected
The ban is residential only. Commercial and business real property LRBAs are completely untouched. An SMSF can still borrow to acquire business premises, including from a related party at arm’s length, and lease them back to a member’s business. Rental income is taxed at 15% in accumulation phase, or 0% in pension phase.
With residential borrowing no longer an option, a commercial LRBA is the one remaining way to borrow for property inside super. Specialist SMSF legal advice is essential before entering any new arrangement.
Where to from here
If you have an SMSF and property is part of your investment strategy, the right step is to get specific legal and financial advice now rather than waiting for the formal commencement date.
At Financial Spectrum, we work with clients whose property decisions sit inside a broader financial plan. If you want to talk through what these changes mean for your situation, book a complimentary strategy session with one of our advisers.
Frequently asked questions
What is an SMSF LRBA?
A Limited Recourse Borrowing Arrangement allows a self-managed super fund to borrow to purchase a single asset held in a bare trust, with the lender’s recourse limited to that asset. It has been available under the Superannuation Industry (Supervision) Act since 2010. The government’s amendment closes this option for new residential property acquisitions, including new builds and off-the-plan purchases.
Does this affect my existing SMSF residential property loan?
No. Existing LRBAs are fully grandfathered, with no requirement to sell or refinance. The key caution: do not refinance without specialist legal advice, as doing so may forfeit your grandfathered status under the new provisions.
Can my SMSF still buy residential property after the ban?
Yes, provided you are not borrowing to do it. Outright purchases of residential property using the fund’s own capital remain permissible. Only new LRBAs used to acquire residential property are prohibited.
Are commercial property LRBAs affected?
No. The ban applies to residential property only. SMSFs can still borrow to acquire commercial and business real property, including premises leased to a member’s business at arm’s length. That strategy is unchanged.
I am mid-process on a residential LRBA. What should I do?
The 45 day transition window after royal assent is designed to allow mid-stream purchases to complete. The contract date, not settlement, is the relevant trigger for grandfathering, so exchanging contracts before the ban commences is the priority. Confirm lender availability now and seek professional advice immediately. Lenders have historically pulled SMSF products before formal deadlines in similar situations.
When does the ban take effect?
Parliament is expected to pass the legislation before rising on 2 July 2026. The ban commences 45 days after royal assent, putting the effective date around mid-August 2026.
Consistently ranked one of Sydney’s top financial planners (Adviser Ratings), Brenton helps his clients life a great life by making the most of their money. Read his full bio here.
