24/06/2026
MARKET UPDATE: The Government has announced a ban on new SMSF borrowings for residential property.
✔ Existing LRBAs remain fully protected
✔ Commercial property borrowing is still allowed
✔ A transition period will apply once legislation is finalised
If you’re considering a residential SMSF purchase, the window is closing fast — get advice early.
Full article below;
Client Update: Government Announces Ban on SMSF Borrowing for Residential Property
The Federal Government has just confirmed a major change that will affect how Australians use their Self Managed Super Funds (SMSFs) to invest in property.
As part of a deal with the Greens to pass broader tax reforms, the Government will ban new Limited Recourse Borrowing Arrangements (LRBAs) for residential property inside SMSFs.
What’s Changing
The Government has agreed to legislate a ban on all new SMSF borrowings used to acquire residential property.
Key points:
• Existing LRBAs are fully protected — no changes to current loans.
• Contracts signed before the law takes effect will be grandfathered.
• There will be a 45 day transition period once the legislation receives Royal Assent (expected mid August 2026).
• Commercial property is completely unaffected — SMSFs can still borrow to purchase business premises.
• Tax settings inside super remain unchanged (15% accumulation, 0% pension phase, CGT discount preserved).
Why This Is Happening
This change is not about housing affordability — SMSFs represent less than 1% of residential property borrowing.
Instead, the ban was the political trade off required to secure Senate support for the Government’s broader tax package.
Industry experts have been quick to point out that:
• LRBAs have been used responsibly for nearly two decades
• They pose no material risk to the superannuation system
• The ban disproportionately affects every day Australians — not “wealthy property investors”
Who Is Affected
You are not affected if:
• You already have an LRBA in place
• Your SMSF owns residential property outright
• You are using (or planning to use) an LRBA for commercial property
You may be affected if:
• You are currently mid process on a residential SMSF purchase
• You were planning to use an LRBA to buy residential property in the future
If You’re Mid Process Right Now
Timing is critical.
• Exchange contracts as soon as possible — the contract date is what determines eligibility.
• Lenders may begin withdrawing SMSF residential loan products before the ban formally starts.
• If you’re already underway, speak to your broker or SMSF specialist immediately.
What Are the Alternatives?
While residential LRBAs are ending, SMSFs remain one of the most tax effective structures in Australia — and there are still several ways to access property exposure inside super:
• Commercial property via LRBA (still allowed and now even more attractive)
• Fixed unit trusts with external borrowings
• Tenants in common structures (SMSF portion must be unencumbered)
• Superannuation Unrelated Investment Trusts (SUITs) — allowing leveraged property exposure with unrelated SMSFs
These strategies require specialist advice but remain viable pathways.
The Bottom Line
This is a significant policy shift, but it is not the end of property investing inside super.
Your existing arrangements are safe, commercial property remains fully accessible, and SMSFs continue to offer unmatched tax advantages — especially with the new restrictions on negative gearing and CGT outside super.
If you’re considering a residential SMSF purchase, the window is closing quickly. If you’re exploring alternatives or want clarity on how this affects your strategy, now is the time to get advice.
For more information, feel free to contact me. Tracie Palmer
Cornerstone Home Loans 07 3264 7100
Email. [email protected]
Disclaimer: This article is not intended to provide advice, it is merely the opinion of the author. Please seek advice from your accountant, financial planner for other financial professional.
