Yesterday was a significant day for superannuation. As part of a deal struck between the Albanese Government and the Australian Greens to pass the first tranche of its tax reform legislation, Parliament confirmed that self-managed super funds will no longer be able to borrow to purchase residential property through a limited recourse borrowing arrangement (LRBA).Â
There is a lot to unpack here, and depending on your situation, the practical impact ranges from nothing at all to needing to act in the next few weeks. Here is what you need to know.
If you already hold residential property in your SMSF
Nothing changes for you. Existing LRBAs will be grandfathered. You are not required to sell, refinance, or restructure anything. The concessional tax treatment your fund enjoys on rental income and future capital gains remains exactly as it was. Our strong recommendation is that you do not refinance or restructure your existing loan without specialist advice, as doing so could inadvertently put that grandfathered status at risk.
If you have a residential LRBA in progress right now
This is where timing matters, and we want to be direct with you: there is a window, but it is not a large one.
The ban takes effect 45 days after the legislation receives royal assent. Royal assent is expected within days of the Senate vote, which is due before Parliament on 2 July 2026. That places the effective commencement date around mid to late August 2026. Critically, protection is based on having a contract signed before that date, not on whether your loan has been formally approved or settlement has occurred.
If you have been actively working toward a residential LRBA purchase and contracts are not yet exchanged, the time to act is now. SMSF establishment, bare trust setup, lender approval, and contract exchange all take real time. If you are mid-process, please call us this week so we can work through where you stand and whether there is a realistic path to exchange within the window.
If you were planning a residential LRBA but haven't started
The strategy is no longer available for new arrangements once the ban commences. If this was part of your broader financial plan, it is worth a conversation about what alternatives exist within your super fund and outside it. We are happy to work through that with you, alongside your financial adviser where appropriate.
Buying your business premises through super: nothing has changed
For business owners, the most important message is this: the ban applies only to residential property. Commercial property LRBAs, including the strategy of purchasing your own business premises through your SMSF and leasing them back to your operating entity, are completely unaffected. This remains one of the most tax-effective strategies available to Australian business owners, and it is very much still on the table.
If that strategy is something you have been considering, the changes announced yesterday give us no reason to slow down that conversation.
What this sits alongside
This LRBA change is separate from the Government’s broader CGT and negative gearing reforms, which we covered in a recent post. Importantly, superannuation funds were explicitly carved out of the CGT discount changes. Your SMSF continues to benefit from a 15% tax rate on rental income in accumulation phase, an effective 10% CGT rate on gains in accumulation, and a 0% rate for members in pension phase. None of that has changed.
Our approach
If you have an existing residential LRBA, no action is required and we will be in touch as part of our normal review cycle. If you are mid-process on a residential purchase, please contact us urgently. And if you are a business owner who has been thinking about buying your premises through super, we would love to have that conversation at your next opportunity.
