Superannuation law around Limited Recourse Borrowing Arrangements, commonly known as LRBAs, has changed in a way that directly affects anyone considering property as part of their SMSF strategy. Legislation banning new residential LRBAs received Royal Assent in June 2026 and took effect on 10 August 2026. If you are an SMSF trustee, or considering setting one up with property in mind, here is what this means in practical terms.
Why This Change Matters
Property has long been a significant part of the SMSF landscape. Recent industry analysis of ATO data indicates SMSFs collectively hold in the order of $178 billion in property assets, spanning both residential and commercial holdings, out of a total SMSF sector now estimated at $1.06 trillion. Given the scale of property within the sector, a change to how that property can be financed is not a minor technical adjustment. It genuinely reshapes what is available to trustees going forward.
What Is an LRBA?
An LRBA allows an SMSF to borrow money to acquire a single asset, such as property, while limiting the lender’s recourse to that specific asset if the loan is not repaid, protecting the fund’s other assets from being called upon. This structure has historically allowed SMSFs to invest in property they could not otherwise afford to purchase outright using existing fund balances alone.
What Has Changed
As of 10 August 2026, SMSFs can no longer enter into new LRBAs to acquire residential property. This restriction applies to new arrangements entered into from that date onward. Trustees who had residential property as part of their future SMSF strategy need to be aware that this specific pathway, borrowing within the fund to acquire residential property, is no longer available going forward.
What Has Not Changed
LRBAs for commercial property remain entirely unaffected by this change. SMSFs can continue to use borrowing arrangements to acquire commercial property, including business real property such as premises used by a member’s own business, subject to the usual requirements around loan structure, related party arrangements, market rent, and the fund’s investment strategy. Nothing about this legislative change alters the well-established commercial property pathway that many business owners already rely on.
Why This Matters for Business Owners Specifically
For business owners, this change arguably reinforces the existing strategic advantage of commercial property strategies within an SMSF, since that pathway continues to operate exactly as it did before under the existing LRBA framework, while the residential pathway has now closed.
What Trustees Should Do Now
- If you already hold a residential property through an existing LRBA established before 10 August 2026, this change does not retrospectively apply to that existing arrangement, but you should still confirm your fund’s ongoing position with your adviser
- If residential property was part of your future SMSF strategy, it is worth revisiting whether a commercial property structure could achieve a similar underlying goal
- Do not rely on general commentary, including this article, to determine precisely how the change applies to your specific fund’s circumstances
What This Means for Funds Currently Mid-Transaction
Trustees who had a residential property purchase in progress before 10 August 2026, with contracts exchanged but an LRBA not yet finalised, are in a particularly time-sensitive position. Whether an arrangement entered into just before the effective date is captured by the new rules, or whether specific transitional provisions apply, is exactly the kind of question that needs a direct, specific answer from a qualified adviser.
The Broader Context
This change did not emerge in isolation. It reflects a longer-running policy conversation in Australia about the role superannuation should play relative to the broader housing market, and about balancing the tax-concessional treatment of superannuation with policy objectives around housing supply and affordability.
How New Wave SMSF Helps
This is exactly the kind of legislative shift where having an integrated accounting, financial planning, and legal team matters. We are reviewing the practical impact of this change across our client base and can talk you through what it specifically means for your fund and strategy going forward.
Frequently Asked Questions
Does this change affect residential property my SMSF already owns?
This change applies to new LRBAs entered into from 10 August 2026 onward. Existing arrangements established before that date are not retrospectively affected by the ban itself.
Can my SMSF still buy commercial property using borrowing?
Yes. LRBAs for commercial property, including business real property, remain unaffected by this legislative change.
Can my SMSF still buy residential property without borrowing?
The ban specifically applies to new LRBAs, meaning borrowing arrangements, for residential property. Whether a fund can otherwise purchase residential property outright depends on the fund’s overall liquidity, investment strategy, and compliance with the sole purpose test.
Why was this legislation introduced?
The change reflects broader policy discussion in Australia about the interaction between superannuation and the residential housing market. This article does not take a position on the policy merits.
What should I do if residential property was part of my SMSF plan?
Speak with your adviser about alternative strategies, including whether a commercial property structure could meet a similar underlying objective.
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This article is general information only, reflects our understanding of the legislation as at the date of publication, and does not take into account your personal objectives, financial situation, or needs. It does not constitute financial, tax, or legal advice. New Wave Financial Planning Pty Ltd is an Authorised Representative of NWG Financial Services Pty Ltd, AFS Licence No. 538619. Please speak with your New Wave SMSF adviser before acting on any information in this article.