Key Takeaways
- Parliament has passed a ban on new borrowing to buy residential property inside an SMSF, with the change expected to start around mid-August 2026.
- Existing arrangements are grandfathered, and contracts signed before the start date stay protected even if they settle later.
- SMSFs can still buy residential property with fund cash, and LRBAs for commercial or business real property continue.
- Anyone planning a geared residential purchase through super may have a short window to act, so timing and structure matter now.
The SMSF property loan ban ends one of the most common ways to buy property inside a self-managed super fund (SMSF). Parliament has passed a ban on new loans to buy residential property through a limited recourse borrowing arrangement (LRBA). For anyone planning a geared purchase through their fund, the question is no longer whether to buy, but whether there is still time.
The ban applies to future borrowing, not loans already in place, and that line decides who needs to act quickly and who can carry on as usual. An experienced SMSF mortgage broker can help you work out where you stand before the start date.
What the SMSF Borrowing Ban Changes
The change is narrow:
Ending Residential Property Borrowing
From commencement, an LRBA can only fund real property that qualifies as business real property. A house or apartment does not meet that test, so a fund can no longer borrow through an LRBA to buy a residential home.
Keeping Commercial Borrowing Available
An SMSF may still borrow under an LRBA for a range of other assets, including commercial or business real property, shares, or units in a trust, subject to the usual rules.
Preserving Super Tax Treatment
The wider tax treatment of super is unchanged. Concessional rates in the accumulation phase and tax-free eligible pension income continue, and super was left out of the capital gains tax (CGT) and negative gearing measures in the same package. Those wider negative gearing and CGT changes sit alongside the ban, which removes only a financing method, not the reasons many investors hold property inside super.
When the Ban Starts
The change is prospective, so the dates decide who still has time to act:
The 45-Day Window After Royal Assent
The ban is expected to begin 45 days after the legislation receives Royal Assent. With the bill having passed both houses of Parliament on 25 June 2026, the start date is likely to fall around mid-August 2026. The exact day depends on when Royal Assent is granted, so it could shift slightly.
General guide only. These dates are indicative and may change as the legislation is finalised, so confirm the current position before acting.
The Protection for Signed Contracts
A contract exchanged before commencement can still proceed under an LRBA, even if settlement happens afterwards. The contract date, not the settlement date, is what preserves access.
Who the Ban Affects
The impact depends on where you sit in the buying cycle:
Trustees With an Existing Loan
Trustees who already hold a residential property under an LRBA are unaffected. Existing loans are grandfathered and may be refinanced on normal terms, with no need to sell or restructure because of the change.
Trustees Mid-Purchase
For trustees partway through a residential purchase, timing is critical. Exchanging contracts before the start date preserves access to the LRBA, even if the loan settles later. Moving promptly and keeping clear records of contract dates may help.
Trustees Still Planning a Purchase
Trustees who have not yet started face the tightest constraint. Setting up a fund, arranging finance, finding a property, and exchanging contracts all take time, and that time is now limited. After commencement, a residential purchase inside super would need to come from existing cash rather than borrowing.
Options That Remain for Investors
Losing one financing route does not close off property inside super. Other paths remain:
Buying Residential Property With Fund Cash
A fund can still buy residential property outright where it holds enough cash, provided the purchase fits its investment strategy and diversification requirements. Without leverage, the return profile changes, but residential exposure stays possible.
Borrowing for Commercial or Business Real Property
For business owners, holding business premises inside super through an LRBA remains a practical strategy. The key is confirming the property meets the business real property test before relying on it.
Reviewing Your Broader Portfolio Structure
For some trustees, the change is a prompt to revisit how the whole portfolio is held across personal names, trusts, and super. The right structure depends on your income, goals, and existing assets, and it may be worth reviewing borrowing capacity and entity choices, including options for building a property portfolio, before committing.
Where This Leaves SMSF Investors
The SMSF property loan ban closes one route into residential property, but it does not remove the case for holding property inside super. The trustees best placed are those who check their timing now and structure any move carefully.
Unconditional Finance works with SMSF, trust, and complex-income lending, and can help you weigh your options before the start date. A short conversation now may prevent a rushed decision later.
Frequently Asked Questions (FAQs)
What is a limited recourse borrowing arrangement?
A limited recourse borrowing arrangement lets an SMSF borrow to buy a single asset, held in a separate trust, where the lender’s claim is limited to that asset. Governed by the ATO’s LRBA rules, it has been the main way funds have geared into property since 2007.
Does the ban affect my existing SMSF property loan?
No. Existing loans are grandfathered and continue as they are. There is no need to refinance, restructure, or sell, and refinancing an existing arrangement is still allowed.
Can my SMSF still buy residential property?
Yes, but generally only with cash the fund already holds. The ban removes borrowing through an LRBA for residential property, not the ability to own residential property outright where it suits the fund’s strategy.
When does the SMSF borrowing ban start?
The change is expected to take effect 45 days after the legislation receives Royal Assent, which current estimates place around mid-August 2026. The precise date may move, so it is worth confirming the current position before you act.
Can I still use an LRBA for commercial property?
Yes. A fund can still use an LRBA for qualifying commercial or business premises, and a broker who handles complex SMSF lending can help confirm whether a property meets the definition.
This article is general information only and does not take into account your objectives, financial situation, or needs. It is not financial, credit, tax, or legal advice. Rules and start dates may change as the legislation is finalised, so speak with a qualified professional about your own circumstances before making any decision.