Investing13 min readUpdated
SMSF borrowing rules in Australia 2026: what the end of residential LRBAs means for property investors
On 23 June 2026 Labor and the Greens struck a Senate deal that led to Schedule 5 of the Treasury Laws Amendment (Tax Reform No. 1) Act 2026. New ordinary residential LRBAs closed from commencement on 10 August 2026. Existing loans and pre-commencement contracts are protected; commercial business real property LRBAs remain open.
Updated 10 August 2026 · Full commencement-day guide · SMSF lending service · Send an enquiry
Post-commencement note: This article was first published on announcement day (23 June 2026). The law commenced on 10 August 2026. For the definitive post-commencement map — QC107811, same-asset refinance, binding-contract protection and commercial BRP — read SMSF borrowing rules from 10 August 2026.
On 23 June 2026, Labor and the Greens struck a Senate deal that secured passage of the government’s tax reform package. As part of that bargain, the government agreed to end the exemption that allowed self-managed super funds (SMSFs) to borrow to buy residential property under a limited recourse borrowing arrangement (LRBA).
That political deal became Schedule 5 of the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (No. 49 of 2026). Royal Assent was 26 June 2026. Commencement was the 45th day after Royal Assent — 10 August 2026.
If you currently hold residential property inside an SMSF, or were planning to gear a house or unit inside super, this page summarises what changed and points you to the full post-commencement guide. General information only — not personal financial, legal, or tax advice.
For LRBA mechanics: SMSF property loan Australia — LRBA explained. For the complete service guide: SMSF property lending.
TL;DR — the three changes (correct dates)
| Change | What it means | When |
|---|---|---|
| No new ordinary residential LRBAs | SMSFs cannot take out new borrowings to purchase ordinary residential real estate | Effective 10 August 2026 |
| Existing LRBAs + pre-commencement contracts protected | Current residential LRBAs continue; binding contracts exchanged before commencement can still complete | No forced unwinding |
| Commercial / BRP LRBAs remain open | Borrowing to buy business real property (shop, warehouse, factory used in a business) | Still available |
Key framing: the ATO says “LRBAs are not banned.” What changed is the asset class for new real-property borrowing.
What is an LRBA — and why investors used it
A Limited Recourse Borrowing Arrangement (LRBA) is the legal structure that allowed SMSFs to borrow to buy an asset — including, until commencement, ordinary residential property. Since 2007 it was a popular strategy for investors who wanted to combine super tax advantages with direct property ownership.
| How LRBAs worked | What it meant |
|---|---|
| SMSF borrows from a lender | Loan is limited recourse — on default, lender can only seize the specific property, not other SMSF assets |
| Bare trust holds legal title | Property sits in a separate trust while the loan is outstanding; SMSF holds beneficial interest |
| Rental income flows to SMSF | Taxed at 15% in accumulation — below most personal marginal rates |
| Title transfers on repayment | Once the loan is repaid, property moves into the SMSF's name outright |
From 10 August 2026, that option is gone for new ordinary residential arrangements. Commercial business real property LRBAs continue where the asset meets SIS Act BRP rules and stays BRP for the life of the loan.
The three buckets: which one is your SMSF?
| Bucket | Situation | What happens |
|---|---|---|
| Bucket 1 | SMSF owns residential property outright — no loan | No change. Hold inside super with no new LRBA restrictions. |
| Bucket 2 | SMSF has an existing residential LRBA (or binding contract before 10 Aug) | Protected. Loan continues / completion can proceed. Same-asset refinance allowed (ATO QC107811). |
| Bucket 3 | You were planning to borrow inside super for ordinary residential property after commencement | Strategy no longer available. Model alternatives. |
Your existing LRBA — what changes and what does not
| Element | For protected residential LRBAs |
|---|---|
| Loan repayments | Unchanged — continue as scheduled |
| Rental income | Unchanged — 15% in accumulation, pension-phase rules separate |
| Capital gains on sale | Unchanged — CGT concessions inside super still apply |
| Bare trust structure | Unchanged for the life of the loan |
| Refinancing | Allowed for the same asset (ATO QC107811) — same or new lender |
| Changing to a different residential property | Treated as a new arrangement — not allowed after commencement |
| Adding a new ordinary residential LRBA | Not permitted |
Refinance — no longer a grey area
The ATO (QC107811, 28 July 2026) confirms you may maintain or refinance a pre-commencement LRBA for the same asset, including changing lenders. Earlier commentary that treated refinance as unsettled is superseded. Still obtain SMSF legal and auditor confirmation before you change loan documents — credit policy and SIS compliance are separate questions.
Primary source: ATO — Changes to limited recourse borrowing arrangements.
Before and after: two investors
Sarah — existing LRBA (protected)
Sarah's SMSF purchased a two-bedroom Brisbane unit in 2022 using an LRBA. The fund borrowed $450,000; the property is now worth $620,000 with 12 years remaining on the loan.
| Element | Outcome |
|---|---|
| Position after 10 August 2026 | Protected — no change required |
| Rental income | Still taxed at 15% inside the SMSF |
| Capital gain when sold | Still eligible for CGT concessions inside super |
| Refinance | Same-asset refinance may be explored with SMSF legal confirmation |
James — planned LRBA (no longer available)
James has $280,000 in his SMSF and was planning to borrow $420,000 for a Melbourne townhouse inside super after commencement.
| Element | Outcome |
|---|---|
| Position after 10 August 2026 | New ordinary residential LRBA cannot be established |
| SMSF balance | Remains in fund — can be invested in other asset classes |
| Alternatives | Buy residential outside super; commercial LRBA inside SMSF (still permitted if BRP); listed property trusts (REITs) inside the fund |
| Action | Reassess with a property accountant or SMSF adviser |
Commercial property LRBAs: still permitted
SMSFs can still borrow to purchase business real property — commercial premises used wholly and exclusively in a business — and the asset must remain BRP for the life of the LRBA.
| Property type | LRBA status from 10 August 2026 |
|---|---|
| New ordinary residential LRBA | Closed |
| Existing residential LRBA / pre-commencement contract | Protected |
| Commercial / business real property LRBA | Still permitted |
| Vacant land for residential development | Treated as ordinary residential path — new LRBAs not permitted |
| Mixed-use property | Seek specific advice — classification depends on use |
If you run a business and planned to use your SMSF to purchase your commercial premises via an LRBA, this strategy remains the open lane. It still requires proper arm's-length lease documentation from day one.
Our SMSF lending guide covers commercial LRBA lender policy, liquidity buffers, and the broker-side checklist. Deep dive: 10 August 2026 commencement guide.
Why this rule existed — and why it ends now
| Factor | Detail |
|---|---|
| Why LRBAs were allowed (2007) | Gave SMSF trustees flexibility; let Australians invest in property they understood using super savings |
| Why critics opposed them | Created leverage inside a retirement safety net; Murray Inquiry (2014) warned of systemic banking risk if LRBAs became widespread |
| Why they survived until 2026 | Affected a small share of home loans nationally — limited political footprint |
| Why they end now | Greens demanded the change as a condition of supporting Labor's broader tax package (ABC News, 23 June 2026) |
What to do now
| Your situation | What to do |
|---|---|
| SMSF holds residential property outright (no loan) | No immediate LRBA action. Keep cost base records, rental history, and property documents in order. |
| SMSF has existing residential LRBA | Confirm bare trust documentation is current. Same-asset refinance is allowed — still get SMSF legal confirmation. |
| Binding contract exchanged before 10 August | Confirm protection with your SMSF solicitor; complete finance and settlement carefully. |
| Planned new residential LRBA after commencement | Model alternatives: purchase outside super, commercial LRBA, or REITs inside the fund. |
| Planned commercial LRBA | Proceed with licensed SMSF advice and broker credit pre-assessment. |
| Investment property outside SMSF | Budget 2026 CGT and negative gearing changes may affect you directly. |
Broker checklist (credit side only)
When you send an enquiry, include:
- Fund balance + contribution plan (accountant confirms strategy).
- Property type — protected residential, commercial business real property, or residential outright (no loan).
- Existing LRBA? — lender, balance, bare trust names, whether same-asset refinance is on the table.
- Liquidity after settlement — modelled in dollars.
- Licensed adviser sign-off — we need this before lodging any new commercial LRBA file.
We provide credit assistance only — not super or financial-product advice ( RG 273 / INFO 274).
FAQs
Can I still buy residential property inside my SMSF without borrowing?
Yes — using the fund's own cash, subject to contribution caps, liquidity buffers, and SIS Act rules (arm's-length acquisition, no related-party occupancy). The restriction applies to new borrowings for ordinary residential property, not outright purchases.
Does the change affect my SMSF tax rate?
No change to super tax mechanics: 15% on accumulation-phase earnings, 0% in pension phase (subject to transfer balance cap), concessional CGT treatment inside super on long-held assets in accumulation. Protected residential LRBAs retain concessional treatment.
I exchanged on a residential SMSF LRBA before 10 August but have not settled — am I protected?
Yes under ATO QC107811 if the binding contract was exchanged before commencement — even if settlement or the LRBA occurs later. Significant later variations may change that analysis. Get SMSF legal advice on your specific contract.
Is SMSF property still attractive after Budget 2026?
The relative case for super property changed twice: May 2026 tightened personal investor tax rules; June–August 2026 closed new ordinary residential LRBA leverage. Commercial LRBA and outright residential inside super remain — but the decision still depends on contribution capacity, compliance cost, and hold horizon. Not automatic.
Where do I start for lender paperwork on a commercial LRBA?
Contact us with fund type, balance, property category, and state. Parallel SMSF accountant engagement is non-negotiable.
Related guides
- SMSF borrowing from 10 August 2026 — full commencement guide
- SMSF property lending — complete service guide
- SMSF property loan — LRBA structure explained
- Budget 2026 — negative gearing & CGT for investors
- Investment property loans (personal)
- Property investor hub
Next step: Send an enquiry · Apply pathway
General information only. SMSF, tax, and credit law change. Confirm structure with your SMSF specialist and formal lender documentation before you exchange contracts. Primary sources: ATO QC107811; Treasury Laws Amendment (Tax Reform No. 1) Act 2026 No. 49.
Azure Home Loans — general information only, not personal credit advice.
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