If you've been thinking about buying an investment property in your SMSF using a loan, the rules are about to change in a big way. On 23 June 2026, Prime Minister Anthony Albanese and Treasurer Jim Chalmers confirmed the federal government will support a Greens amendment to ban new SMSF limited recourse borrowing arrangements (LRBAs) for residential property, as part of the broader tax deal needed to get the government's Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 through the Senate.
That sounds dramatic, but there's still good news for existing arrangements and plenty of options for smart investors in the Sutherland Shire and beyond.
The Headline Change
The government has confirmed it will support an amendment to ban future LRBAs for residential property inside super funds. In the Prime Minister's words: "The Government has agreed to support an amendment that will be moved by the Greens to ban future limited recourse borrowing arrangements (LRBAs) for residential property by superannuation funds."
Existing LRBAs and contracts signed before the new law starts are expected to be grandfathered, with a 45 day transition period for deals already underway once the relevant legislation receives royal assent.
Commercial property is specifically flagged as unaffected, so LRBAs over business premises can continue.
Quick Snapshot Of The New Rules
Here's the change in plain English based on what's been announced so far:
You won't be able to start a new LRBA to buy residential property inside an SMSF once the ban takes effect.
Any current LRBA over residential property stays in place and is not being unwound.
If you've already exchanged contracts before commencement, you're expected to be protected under grandfathering rules. The contract date is the key trigger, not when you started the process.
There will be around 45 days after royal assent where "midstream" transactions can still proceed.
LRBAs over commercial property are still allowed under the proposed changes.
The legislation isn't in final form yet, so the fine print may shift, which is why tailored advice is critical.
Why Is This Happening Now?
This ban is the price the Greens extracted for their Senate support of the government's wider tax package, which also overhauls the CGT discount and negative gearing rules.
The government has been at pains to downplay the impact. Treasurer Chalmers pointed to ATO figures showing SMSF borrowing represents less than 1 per cent of total residential property borrowing nationally, and less than 0.5 per cent of new residential borrowing each year. He also cited the 2014 Murray Financial System Inquiry, commissioned under the Coalition, which raised concerns about the risks LRBAs pose to superannuation investors.
In other words, this move is unlikely to do much for housing affordability in the Shire, but it helped the government secure the votes it needed for its wider tax agenda.
Who Is Actually Affected?
Despite political talk about "wealthy property investors", ATO data shows LRBAs are most common in SMSFs with balances between $500,000 and $1 million, not ultra high net worth funds. Residential property, with or without borrowing, is most common in funds between $500,000 and $2 million.
You are generally not affected if:
Your SMSF already has a residential LRBA in place.
Your SMSF owns residential property outright, with no loan.
You only use, or plan to use, an LRBA for commercial property (for example, your business premises).
You may be affected if:
You're mid process on a residential LRBA purchase.
You were planning to use an LRBA in the future to get into the residential market via your SMSF.
If You're Already Mid Process
If you're partway through an SMSF residential purchase with borrowing, for example you've found a townhouse in Kirrawee and you're lining up the bare trust and bank loan, timing is now critical.
The government has indicated that contracts signed before the changes commence will not be affected, with an extra 45 day transition window for current deals. Lenders may pull SMSF residential loan products quickly once the bill is close to passing, so waiting for perfect clarity could mean the product disappears before you move. If you're mid process, the advice from specialists is straightforward: exchange contracts as soon as you reasonably can.
The Politics (Without The Noise)
Industry bodies and SMSF specialists have pointed out that multiple reviews have found LRBAs do not pose a material systemic risk to the super system, and that regulators were mainly worried about low balance funds with concentrated positions or personal guarantees, not SMSFs generally.
Critics have been vocal. Arjun Paliwal of InvestorKit argued the people most affected are everyday Australians who have worked hard, built up their superannuation balances, and are looking for ways to take greater control of their retirement outcomes, and warned the move could increase future reliance on government support. Natalia Clack of Easy Super noted that for many Australians, accumulating sufficient funds to purchase residential property outright inside an SMSF may simply not be realistic, which narrows the field meaningfully. PIPA chair Cate Bakos made a similar point, noting SMSF property investors are often families with strong balances who turn to this strategy when traditional borrowing becomes difficult, and that they will now miss out on a path to build future wealth within their fund.
Whatever your view, the reality is the rules are changing, and the focus now is how to adapt.
Good News: SMSFs Still Have Big Advantages
Even with this ban, the SMSF structure remains one of the most tax effective ways to build long term wealth.
Income in accumulation phase is still taxed at 15%, and at 0% when you're in pension phase.
The one third CGT discount inside super is unchanged for assets held more than 12 months.
Commercial property LRBAs remain available under current announcements.
Shares, ETFs and managed funds inside SMSFs are untouched by these changes.
Division 296, the extra tax on very large super balances from 1 July 2026, is already law and entirely separate from this LRBA change.
On top of that, after the 2026 Budget, SMSFs are now the only structure where you can buy an existing residential investment property and still access negative gearing in the same way. Personal names, family trusts and company structures are all caught by the new restrictions on negative gearing; the SMSF is not. In a sense, the 2026 Budget has made SMSFs more attractive relative to personal property investing, even as the borrowing door for new residential purchases closes.
Property Strategies That Still Work In Super
If you were banking on a residential LRBA, this feels like a door closing, but there are still several doors open.
1. Business Premises In Your SMSF
LRBAs for commercial property are explicitly confirmed as unaffected, which keeps a powerful strategy on the table for business owners. Your SMSF can still borrow to buy your business premises (for example, a medical suite in Miranda or an office in Caringbah), then lease it back to your trading entity on commercial terms, with rent taxed at concessional super rates.
2. Fixed Unit Trusts With Personal Borrowing
A fixed unit trust can allow your SMSF to own units funded from contributions and earnings, while you or other investors borrow personally against your units. The property sits in the trust, not directly in the SMSF, and the SMSF does not borrow. The key is ensuring the trust qualifies as a fixed trust and avoids in house asset issues. This is a technical strategy that needs specialist structuring, but it can keep geared property exposure on the table.
3. Tenants In Common (No Debt On Title)
Your SMSF can buy a percentage of a property alongside you or family members as tenants in common, with the fund's share owned outright and personal borrowings secured separately. The crucial rule is that there can't be borrowing secured against the property title itself on the SMSF side; the fund's slice must remain unencumbered.
4. Superannuation Unrelated Investment Trusts (SUITs)
For investors willing to pool resources with genuinely unrelated SMSFs, a Superannuation Unrelated Investment Trust (SUIT) structure may become increasingly attractive. With multiple unrelated SMSFs each holding a minority interest, the trust can borrow in its own right and use property as security, giving SMSFs leveraged exposure via units rather than a direct LRBA. This can open up higher value assets and even development opportunities, but the structure needs careful legal and tax advice.
What Hasn't Changed For Your Retirement Plan
With all the noise, it's worth zooming out.
Existing residential LRBAs are protected under the proposed grandfathering.
Commercial property strategies via LRBA are still available.
Shares, ETFs, managed funds and cash strategies inside SMSFs are untouched.
Division 296 (the extra tax on very large super balances from 1 July 2026) is already law and separate from this LRBA change.
For many Shire families, SMSFs remain a flexible, tax effective way to combine property, business assets and diversified portfolios in one structure.
How We're Talking To Clients About It
For local clients, we're framing this as a rule change to work around, not a reason to panic. Conversations tend to focus on:
Whether an SMSF still fits their long term goals.
How much of their retirement plan was reliant on a future residential LRBA.
Which alternative strategies (commercial property, unit trusts, co ownership or listed property) make sense for their situation.
Practical Next Steps
If you're in the Shire and any of this sounds close to home, here's a simple roadmap:
Get clarity on where you are now
Do you already have an LRBA? Over what type of property?
Are you mid process on a residential SMSF purchase?
Don't rush into or out of anything
The headlines are loud, but your decisions should be based on your age, risk tolerance, business situation and retirement timeline.
Explore your "Plan B" options
Commercial premises in super, unlevered residential, listed property, or trust and co ownership structures can still play a role.
Get personalised advice
This is general information only and doesn't take into account your objectives, financial situation or needs. Before you act, speak with a licensed financial adviser and SMSF specialist, and where relevant, your tax adviser or solicitor.
References
Prime Minister's Office, statement on LRBA amendment, 23 June 2026
Smart Property Investment, "Government slams brakes on SMSF property investing following Labor-Greens deal", 23 June 2026
Smart Property Investment, "SMSF borrowing ban to hit ordinary Australians, as experts warn of unintended consequences", 23 June 2026
Real Estate Business, "Government slams brakes on SMSF property investing following Labor-Greens deal", 23 June 2026
SMS Magazine, "LRBAs banned for residential property", 23 June 2026
Your Investment Property Mag, "Government bans SMSF loans for residential property", 23 June 2026
2014 Murray Financial System Inquiry (referenced by Treasurer Jim Chalmers in support of the policy change)
Australian Taxation Office, SMSF statistical data on LRBA and residential property holdings by fund balance
This article is general information only and does not constitute personal financial, legal or tax advice. The legislation referenced was current as at 23 June 2026 and detailed application, particularly around refinancing and transitional arrangements, remains subject to further guidance.