A Limited Recourse Borrowing Arrangement (LRBA) is the legal structure that lets an SMSF borrow money to buy an asset (typically property). The "limited recourse" part means if the loan defaults, the lender can only claim the property itself - not the SMSF's other assets. Until now, this has been the standard way for SMSFs to borrow to buy property.

New LRBAs used to purchase residential property inside an SMSF. The change inserts a new restriction into section 67A of the Superannuation Industry (Supervision) Act 1993, limiting future LRBAs over real property to business real property only.

The legislation received Royal Assent on 26 June 2026, and the ban commences 45 days later - around 10 August 2026. That 45-day window is the transition period for in-flight transactions.

Nothing changes. Existing LRBAs are fully grandfathered. You don't need to sell, refinance, restructure or unwind anything. Your property and loan continue as they are, including:

• The 15% concessional tax rate on rental income inside super
• CGT concessions on eventual sale
• Your existing loan terms with your lender

This is one of the most important questions we're getting - and one we don't yet have a definitive answer to.

The legislation protects arrangements where contracts are signed before commencement, but off-the-plan purchases raise unique complexities that haven't yet been fully clarified by the Government, the ATO, or industry bodies. Key open questions include:

• Whether a signed off-the-plan contract alone is enough to qualify for grandfathering, or whether the LRBA loan documentation also needs to be executed before commencement
• How delayed settlements (months or even years after contract signing) will be treated
• Whether lender finance approval needs to be in place by commencement, or only the underlying purchase contract
• How variations, sunset clauses, or contract assignments may affect grandfathering

If you have a deposit paid on an off-the-plan property intended for your SMSF, please contact us as soon as possible. We're actively monitoring guidance from the ATO, SMSF Association, and lenders, and we'll work through your specific circumstances with you. Do not assume your transaction is either safe or at risk until we've reviewed the detail together.

Yes. The ban only affects borrowing to buy residential property. If your SMSF has the cash to buy outright, residential property remains a perfectly legitimate investment option.

Yes. LRBAs for business real property - factories, warehouses, offices, retail premises, medical suites, farms and similar - are unaffected. This is particularly relevant if you operate a business and want your SMSF to own the premises.

Generally, real estate used wholly and exclusively in a business. Common examples include:

• Your own business premises (which your business can then lease from the SMSF)
• Commercial offices, factories, warehouses
• Medical and dental practices
• Farmland used in primary production

A residential investment property does not qualify, even if you rent it out.

The change implements a long-standing recommendation from the 2014 Murray Financial System Inquiry, which raised concerns about leverage in super funds and the potential risks to retirement savings and the broader financial system. It also reflects political concern about SMSF borrowing contributing to residential property demand.

No. The concessional tax treatment of super remains unchanged. Contributions, earnings, and pensions are all taxed as they were before. The change is purely about how SMSFs acquire new residential property - not how super is taxed.

If you haven't yet signed a contract, the LRBA route to residential property is closing. You still have options:

• Buy commercial property through your SMSF using an LRBA
• Buy residential property outright with SMSF cash (no borrowing)
• Reconsider whether an SMSF is the right structure for your goals — this is worth a conversation with your adviser
• Explore property investment outside super with appropriate structuring

Speak to your adviser and lender immediately. If your transaction can realistically reach contract signing before ~10 August 2026, you may be able to complete under the existing rules. Don't make a rushed decision purely to beat the deadline - the property needs to be the right investment for your fund regardless of the timing.

Most lenders are continuing to write loans through the transition window, and several non-bank lenders have been particularly active in helping clients complete deals before commencement. Lender appetite is shifting daily, so don't assume your current pre-approval is still valid - confirm directly.

If you have an existing residential LRBA: nothing - you're protected.

If you have an off-the-plan property contract signed and deposit paid (with settlement still to come): contact us as a priority. This is one of the less certain scenarios under the new rules, and we want to review your contract, settlement timeline, and loan position with you before commencement so we can document where you stand and work with your lender.

If you have a deposit paid or a contract in progress: confirm your signing dates and LRBA documentation with your adviser and lender this week.

If you were planning a new residential SMSF purchase: book a strategy review now to look at commercial alternatives, cash purchase options, or other structures.

If you're unsure how this affects your fund: get in touch with us - we'll talk you through it.