SMSF Property Investors | Major Change to Borrowing Rules
The Federal Government has confirmed a significant change to the rules governing Self-Managed Superannuation Funds (SMSFs).
On 23 June 2026, the Government reached an agreement with the Greens to permanently ban SMSFs from using Limited Recourse Borrowing Arrangements (LRBAs) to purchase residential property.
The legislation has now passed Parliament as part of the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 and is expected to receive Royal Assent before Parliament rises on 2 July 2026.
The new rules are expected to take effect 45 days after Royal Assent (likely mid-August 2026).
What Does This Mean?
Once the legislation commences, SMSFs will no longer be able to enter into new borrowing arrangements to acquire residential property.
Importantly, the changes do not affect borrowing to acquire commercial property. SMSFs will still be able to use LRBAs for eligible commercial property investments under the current rules.
Who Is Affected?
If you already own residential property in your SMSF using an LRBA there is no need to panic.
Existing borrowing arrangements are grandfathered, meaning they can continue under the existing rules.
However, if you are considering refinancing your loan, we recommend seeking specialist advice beforehand. Depending on how the refinancing is structured, there is a risk of losing your grandfathered status.
You’ve signed a contract but haven’t settled yet
Good news – you are also protected.
If your contract was exchanged before the commencement date, the transitional provisions allow the purchase to proceed, even if settlement occurs after the new rules take effect.
You’re planning to buy residential property through your SMSF
If you have been considering purchasing residential property through your SMSF using borrowed funds, time is now critical.
The legislation is based on the contract date, not the settlement date. This means anyone wishing to utilise the current rules should ensure contracts are exchanged before the new laws commence.
What Should You Do?
If these changes affect you, or you are unsure whether they might, we encourage you to contact the 4Front Team as soon as possible.
We can help you understand:
- How the new legislation applies to your circumstances;
- Whether your existing arrangements are protected;
- Whether you need to act before the new rules commence, and
- The most appropriate strategy moving forward.
Every client’s circumstances are different, so obtaining advice before making any decisions is essential.
Important Disclaimer
This information is intended to be general in nature only and should not be relied upon as financial, taxation or legal advice.
Before making any decisions regarding your SMSF or property investments, we recommend seeking advice from us, your financial adviser and your solicitor.
Let’s build a future you can look forward to. Book a 45‑minute strategy session or Call us on (07) 3875 9888 or email your enquiries to [email protected] to get started today.