Self-managed super funds may no longer be allowed to enter new borrowing arrangements to buy residential property. The federal government stated this on 23 June 2026. It is part of a deal struck with the Greens to secure passage of the government’s wider tax bill through the Senate.
If you were planning to buy property through your SMSF using a loan, this change may affect your timeline directly.
What exactly is changing
Prime Minister Anthony Albanese and Treasurer Jim Chalmers announced the (proposed) change together. What is expected to be removed is the limited recourse borrowing arrangement, known as an LRBA. An LRBA allows an SMSF to borrow money to buy a single asset, typically property, held inside a bare trust.
If the loan defaults, the lender can only claim that one property. The rest of the fund’s assets remain protected.
This type of borrowing has existed since 2007 and was expanded in 2010. A 2014 review into the financial system recommended scrapping LRBAs at that time. The then government did not act on that recommendation. The current government has agreed to now reversed that position, as part of the agreement reached with the Greens.
What’s protected and what’s not
If your SMSF already has an LRBA in place, nothing is expected to change. Existing borrowing arrangements are expected to be fully grandfathered under the new rules.
The same protection may apply to any contracts signed before the changes take effect. The government has also proposed a 45 day transition period after the bill receives royal assent, covering arrangements already in progress.
So what does the ban actually cover? It is expected to be applied only to new LRBAs for residential property going forward. Loans for commercial property, along with shares, ETFs, and managed funds held inside an SMSF, remain unaffected.
The ban is expected to take effect around mid-August 2026, roughly 45 days after the bill passes. Parliament is due to rise for its winter break on 2 July 2026. The government has indicated it wants the bill passed before then.
Note: As at 23 June 2026, this remains a proposed change. It has not yet passed the Senate or received royal assent.
Why this is happening now
The change is directly tied to Senate negotiations. Chalmers needed Greens support to pass his broader tax package. That package overhauls the capital gains tax discount and negative gearing rules. The Greens have argued that SMSF borrowing for residential property amounts to a loophole favouring wealthy investors. In exchange for supporting the bill, they secured the government’s agreement to this ban.
The government’s own figures provide further context. Chalmers stated that SMSFs account for less than 1 per cent of total residential property borrowing in Australia. He noted they represent less than half a per cent of new residential borrowing each year. By his estimate, the ban would add around $50 million to the budget over the forward estimates. This deal has also cleared the way for the wider package of capital gains tax and negative gearing changes, valued at $8.1 billion, to proceed.
Who is affected by this change
ATO data indicates that LRBAs are most commonly used by SMSFs with balances between $500,000 and $1 million, rather than funds at the highest end of the market.
Industry commentary reflects a similar pattern. SMSF specialists have generally described LRBAs as an appropriate and legitimate way for members to build retirement savings. Some advisers have noted the strategy is often used by clients, such as divorced women seeking to secure a property they may wish to live in during retirement.
Others have pointed to young, high-earning couples with strong superannuation balances but limited savings outside super as another group affected by the change.
What you should do right now
If you are currently in the process of buying residential property through your SMSF using a loan, it is important that you reach out to your SMSF advisor and discuss your personal situation and plans.
The contract date is expected to be the relevant trigger, not the settlement date.
There is also a risk that lenders withdraw SMSF loan products before the ban formally takes effect. A comparable situation occurred in 2019. All four major banks withdrew their SMSF lending products once a similar policy was proposed, well before any legislation had passed. The relevant loan product may become unavailable before the official ban date arrives.
If you are in this position, it is worth reaching out to your professional adviser and lender without delay to discuss your options.
If you already hold an SMSF residential LRBA, no action is required. Your existing arrangement should remain unaffected.
What about commercial property
SMSF borrowing for commercial property is unaffected by these changes. For business owners, this remains a tax-effective way to hold the premises a business operates from.
An SMSF can borrow to buy the property and lease it back to the business at market rent. The fund then pays 15 per cent tax on that rental income during the accumulation phase. This rate reduces to zero once the fund is in pension phase.
There are also other ways to gain property exposure inside super without using a residential LRBA. One option is a unit trust, where personal investors borrow against their own units rather than the fund borrowing directly. Another is a tenants in common arrangement, where the SMSF holds an unencumbered share alongside other owners. A further option involves pooling several unrelated SMSFs to acquire and borrow against a property as a group.
Each of these structures carries specific rules relating to related parties and in-house assets. Specialist advice should be obtained before any of these structures are established.
The bigger picture
This change may remove one borrowing option, but other aspects of the SMSF structure remain unchanged. Recent budget measures have, in some respects, made superannuation a more attractive environment for holding property.
The CGT discount inside super has not been altered. Once the proposed budget changes take effect, an SMSF is expected to be the only structure in which an existing residential property can be purchased as an investment and still negatively geared.
Tax rates inside super are also unchanged. Income is taxed at 15 per cent during accumulation and at zero per cent once a fund is in pension phase.
The removal of residential LRBAs would be a genuine change for some SMSF members, particularly those who had planned to use this strategy. It would not, however, alter the other tax settings that make an SMSF a widely used structure for holding retirement assets.
This article reflects information available as at 23 June 2026. The legislation has not yet been finalised, and details may change before it passes. This is general information only and does not constitute financial or legal advice.
