New borrowing for residential property through self-managed super funds is coming to an end. As part of the deal struck between Labor and the Greens to pass the federal government’s broader tax reform package through the Senate, new limited recourse borrowing arrangements (LRBAs) for residential property will be banned.
Royal Assent was granted on 26 June 2026, and the ban takes effect from 10 August 2026. If you already have an LRBA in place, there’s no need to worry – the new legislation protects existing arrangements in full.
That protection extends further than simply leaving existing loans untouched. Borrowers with a residential LRBA can still refinance, switch lenders, or renegotiate terms, and a smaller pool of eligible lending could work in favour of those who already hold one.
What is an LRBA, and why has it been popular?
An LRBA allows an SMSF to borrow to purchase a single property, held in a separate trust until the loan is repaid. If the fund defaults, the lender’s claim is limited to that property alone, leaving the rest of the fund’s retirement savings protected. It gave trustees a way to buy investment property using their super balance as a foundation, with borrowing used to bridge the gap – much like a standard mortgage, but within the superannuation environment. For many investors, it made direct property investment possible without having to accumulate enough funds within their SMSF to buy outright.
What the ban does and doesn’t cover
The changes are more limited than many people realise, and this is a targeted change rather than a blanket ban on SMSFs investing in residential property.
- The ban applies to new LRBAs for residential property, whether the purchase is a new build or an established home.
- Existing LRBAs are fully grandfathered, and contracts entered into before the changes commence are also protected. A 45-day transition period from the date of Royal Assent allows arrangements already in progress to be finalised
- SMSFs can still borrow to purchase commercial property, provided it meets the business real property definition.
- SMSFs can still buy residential property outright using existing fund assets, with no borrowing involved.
If you already hold a residential LRBA, refinancing remains available to you. You can switch lenders or renegotiate terms with your existing lender to secure a better rate or structure, and there’s no requirement to unwind your loan or sell the property because of the August deadline. The one condition is that any refinance must be like-for-like: the loan can replace or maintain existing borrowings, but it cannot be used to top up the loan, increase borrowings, or release equity from the property to fund other investments within the SMSF.
With new lending switched off for a segment of the market, it’s also worth keeping an eye on how lenders respond. Competition for the existing pool of SMSF residential borrowers may sharpen as a result, which could translate into more competitive interest rates for those looking to refinance.
It’s also important to keep the change in perspective. LRBAs account for less than 1% of total residential property borrowing in Australia and less than 0.5% of new residential borrowing each year.
What are the alternatives?
Capital doesn’t simply disappear when a pathway like this closes, it reallocates. The end of residential SMSF borrowing doesn’t necessarily mean the end of your property investment plans. There are still several funding options available, and the right one will depend on your fund balance, personal financial position and long-term objectives.
Buy residential property within your SMSF without borrowing
If your SMSF has sufficient assets, purchasing residential property outright allows you to keep the investment within super while preserving its tax treatment.
Take out a standard investment loan
Buying an investment property in your personal name sits outside super entirely. Lenders assess your borrowing capacity based on your income and liabilities, giving you access to the broader range of investor loan products available outside the SMSF lending market.
Access equity in an existing property
Using equity in your home or investment property can help fund a deposit or, in some cases, an entire purchase without drawing on your super. Many homeowners and investors have built up more usable equity than they realise.
Talk to us before you decide
There’s still a path to residential property investment – it just looks different to the one an LRBA provided. Getting the structure right from the start makes all the difference. Understanding your options before making any decisions can help you choose the right borrowing solution for your investment and retirement goals.
Whether you’re considering an alternative to an SMSF property purchase or simply want to understand what the new rules mean for you, Just Imagine Finance can help you choose a borrowing strategy that suits your circumstances. To find out more, contact us on catherine@justimaginefinance.com.au or 0414 673 359.
