On 23 June 2026, the Government announced a proposal, following an agreement with the Greens, to restrict self-managed super funds from entering new limited recourse borrowing arrangements for residential property, subject to the legislation being passed and commenced. The amendment was the price of Senate support for the government’s broader tax reform package, and it changes the path for anyone who was planning to use super-leverage to buy an investment property.
If you already hold a residential property through an SMSF property loan Australia, the situation is more protected than the headlines suggest. If you were still planning one, the timeline just became very short.
What Changed, in Plain Terms
A limited recourse borrowing arrangement lets an SMSF borrow to buy a single asset, commonly property, through a separate holding trust. If the loan defaults, the lender can only claim that specific property, not the rest of the fund. It has been a legitimate, regulated strategy since 2007, allowing SMSFs to combine superannuation tax benefits with direct property ownership.
For many investors, SMSF property investment Australia strategies have provided a way to combine long-term retirement planning with direct property ownership.
If the proposed legislation is passed and commenced, SMSFs may no longer be able to enter new LRBA Australia arrangements for residential property. Investors considering this strategy should monitor the progress of the legislation and seek advice before making decisions. The government has described the change as targeted, noting that SMSF borrowing forms a relatively small part of Australia’s residential lending market.
What This Means for Your Specific Situation
The practical impact depends entirely on where you currently sit. Here is the breakdown:
| Situation | Current Position |
| An existing residential LRBA is already in place | Expected to remain unaffected under the proposed changes and continue under existing arrangements. |
| Contract already signed before any legislative commencement | The treatment may depend on the final legislation and transitional provisions once enacted. |
| Planning a new residential LRBA; contract not signed | May be affected if the proposed legislation is passed and commenced. |
| Commercial property LRBA (business premises) | Currently expected to remain available under the proposed changes. |
| Refinancing an existing residential LRBA | The treatment remains uncertain and may depend on the final legislation and lender requirements. |
What the SMSF Structure Still Offers
The borrowing pathway is closing for new residential deals, but the underlying SMSF tax treatment has not changed. Rental income inside the fund is generally taxed at 15% during accumulation. Eligible pension-phase income may be tax-exempt, subject to current superannuation rules, transfer balance caps and individual circumstances. The concessional CGT discount on long-held assets also remains intact.
- Commercial property LRBAs are currently reported to be unaffected by the proposed changes, although investors should monitor the final legislation and obtain professional advice.
- Diversified property exposure remains available: managed funds and listed property trusts inside an SMSF are untouched by this change and don’t require direct borrowing
If you are currently progressing a residential LRBA strategy, the treatment of contracts and borrowing arrangements may depend on the final legislation and any transitional provisions. Investors should seek qualified SMSF, legal and tax advice before proceeding.
Also Read: Residential vs Commercial Property: Which Investment Suits Your SMSF?
Where OM Financials Fits In
Whether you have an existing LRBA, are currently considering a residential property purchase through your SMSF, or are reviewing alternative investment structures, the right finance pathway needs to be assessed against the current rules rather than assumptions based on previous arrangements. Shyam Maggo and the OM Financials team work across more than 50 lenders, including SMSF-specialist lenders, to map out what is genuinely still available to investors seeking SMSF lending Australia solutions.
Book a free consultation at omfinancials.com.au before making any decisions on an existing or planned LRBA. Follow OM Financials on Instagram, Facebook, YouTube, and LinkedIn for updates as the legislation finalises.
Frequently Asked Questions
Q: Will my existing SMSF property loan be affected by the ban?
Answer: Based on current reporting, existing residential LRBAs are expected to remain unaffected if the proposed changes proceed. Investors should monitor the final legislation and obtain professional advice.
Q: Can I still buy a residential property through my SMSF if I act quickly?
Answer: Possibly. The treatment of contracts entered before commencement is expected to depend on the final legislation and transitional provisions. Current reporting suggests a commencement period of approximately 45 days after royal assent, depending on final timing.
Q: Does this ban affect commercial property borrowing inside an SMSF?
Answer: No. Commercial property LRBAs, commonly used by small business owners to hold their premises, are explicitly unaffected by this change.