SMSF property borrowing ban: what has changed and what it means

There has been considerable discussion about the SMSF property borrowing ban. SMSFs are not being banned from owning property. The change generally prevents new limited recourse borrowing arrangements, or Limited Recourse Borrowing Arrangements (LRBAs), from being used to acquire property that is not business real property.

What is changing?

The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 is now law and restricts future LRBAs for property that does not meet the business real property test. [1]

In practice, new SMSF borrowing for most residential property will no longer be available. Existing arrangements and eligible business real property are treated differently.

Is SMSF property banned?

No. The headlines can be misleading.

An SMSF may still own residential property without borrowing, subject to the usual rules. Borrowing may also remain available where the property qualifies as business real property and all requirements are met.

The structure, funding and compliance requirements must therefore be reviewed carefully.

When does it start?

The Act received Royal Assent on 26 June 2026. The restrictions commence on 10 August 2026. Existing LRBAs and qualifying arrangements entered into before commencement are generally protected, even where settlement occurs later. [2]

If a contract, finance application or purchase is already underway, seek advice before proceeding. The timing and structure of the arrangement matter.

Who is most affected?

The change is most relevant for people planning to:

• Set up an SMSF to buy residential property
• Borrow through an SMSF to purchase an investment property
• Use super as part of a leveraged property strategy
• Refinance or restructure an SMSF property arrangement
• Move quickly on a residential property purchase already in progress

What should trustees do now?

Trustees should not rush or ignore the change.

Review whether the fund has an existing LRBA, whether a purchase or contract is already underway and whether the investment strategy remains appropriate. Liquidity is also critical because property is a large, illiquid asset and an ungeared purchase may require substantially more cash.

How Falanga & Co can help

SMSF property can be effective, but it is complex. A strategy that worked previously may no longer be available under the new rules.

At Falanga & Co, we help business owners and investors understand the numbers, structure and compliance obligations before major financial decisions are made.

If you have an SMSF, particularly one with property, borrowing arrangements or a major transaction underway, now is the time to review your position.

Get in touch to find out how we can help.

Reference links

[1] Treasury Laws Amendment (Tax Reform No. 1) Act 2026

[2] Sladen Legal – Legislation passed with ban on LRBAs for residential property