A popular super strategy just lost its finance option.
Since 10 August 2026, self-managed super funds can no longer establish new limited recourse borrowing arrangements (LRBAs) to purchase residential property. For trustees who were considering using leverage inside super, the focus has now shifted from timing the opportunity to understanding what options remain.
What Changed on 10 August 2026?
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026, introducing new restrictions on SMSF property borrowing. Under the new rules, SMSFs can no longer enter into new LRBAs to acquire residential property.
An LRBA is a borrowing structure that allows an SMSF to purchase an asset while limiting a lender’s recourse to that specific asset if the loan defaults.
While residential property borrowing has been restricted, SMSFs can still:
- Purchase residential property outright using available cash within the fund.
- Maintain existing residential property LRBAs established before 10 August 2026.
- Refinance eligible pre-existing residential property LRBAs.
- Use LRBAs to acquire qualifying business real property, such as commercial premises used wholly and exclusively in a business.
What Was Grandfathered?
The legislation includes transitional protections for arrangements that were already underway before the commencement date.
The following remain unaffected:
- Existing residential property LRBAs entered into before 10 August 2026.
- Refinancing of eligible pre-commencement residential LRBAs.
- Contracts exchanged before 10 August 2026, even if settlement occurred after the ban commenced.
- LRBAs used to acquire qualifying business real property.
What Does This Mean for SMSF Trustees Today?
For investors who missed the deadline, borrowing to purchase residential property inside an SMSF is no longer an option.
However, SMSFs can still hold residential property where the purchase is funded without borrowing, and commercial property strategies continue to remain available under the LRBA rules. Existing investors with grandfathered arrangements can continue operating under the previous framework, including refinancing where permitted.
As a result, trustees reviewing their long-term retirement and property strategies may need to reassess how property fits within their SMSF structure and whether alternative investment approaches are more appropriate.
Final Thought
The key question for SMSF investors today is how the new borrowing restrictions affect their future property plans and what alternatives remain available under the updated rules. While existing arrangements have largely been protected, new residential property borrowing inside an SMSF is now off the table.
Learn More
If you’d like to understand how these changes affect your SMSF strategy, existing borrowing arrangements, or future property investment plans, speak with a qualified financial adviser or SMSF specialist to assess your options under the new rules.