Please note: This article covers a recent legislative change and is general information only. Specific SMSF decisions, particularly around grandfathering, refinancing, and the transition window, require advice from a qualified SMSF specialist. Wealthlab provides retirement planning, superannuation, and Age Pension advice, and does not offer SMSF establishment or ongoing SMSF advisory services.
What actually changed on 23 June 2026
The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 was the government’s broader tax reform package covering capital gains tax and negative gearing changes for investments held outside super. To pass the Senate, the government needed the Greens’ votes. The Greens’ price was an amendment banning new SMSF residential property LRBAs.
Mechanically, the amendment inserts a new paragraph (c) into subsection 67A(2) of the Superannuation Industry (Supervision) Act 1993. From 10 August 2026, any real property acquired under an LRBA must satisfy the definition of business real property in section 66. Residential dwellings do not meet that test, because they are not used wholly and exclusively in a business.
The change is prospective only. Existing arrangements are fully grandfathered. Contracts exchanged before commencement are preserved even if settlement happens after 10 August. Refinancing existing residential LRBAs is explicitly permitted, though the ATO has not yet issued specific guidance on when a refinance might be treated as a “new” arrangement.
The scale problem: numbers most commentators skipped
Scott and Phil worked through the ATO’s own SMSF statistics on the podcast, and the numbers deserve airing more widely, because they matter to any assessment of whether the ban will do what the Greens said it would.
As at March 2026:
- Total net SMSF assets: approximately $1 trillion
- Total assets held under LRBAs: approximately $80 billion (roughly 8% of SMSF assets)
- Residential property held under LRBAs: approximately $62 billion (roughly 6% of SMSF assets)
- SMSFs holding residential property under an LRBA: approximately 8,000 to 10,000 nationally
- Share of Australian home loans: less than 1%
Treasurer Jim Chalmers confirmed the sub-1% figure himself when the amendment was announced, telling reporters that SMSFs represent “less than 1% of total residential property borrowing, and less than half a per cent of new residential borrowing each year.”
To make the scale genuinely comprehensible, Phil used a time analogy on the podcast that is worth borrowing. One million seconds is roughly 11.5 days. One billion seconds is about 31.7 years. One trillion seconds is 31,700 years. On that scale, $80 billion in LRBA assets equates to about 2,400 years, sitting inside $1 trillion (31,700 years) of total SMSF assets. Residential LRBAs inside that are smaller again.
The Greens’ argument for the ban was that SMSF borrowing lets high-net-worth investors outbid first home buyers and renters. The numbers make that argument difficult to sustain: at less than 1% of the residential property market, this segment cannot mathematically move prices in the way suggested. As Phil put it on the podcast: “If it’s less than 1% of the residential property market, it’s not moving the number whatsoever. It physically can’t.”
The government’s own budget estimate for the change is a $50 million improvement to the federal bottom line. In fiscal terms, that is a rounding error.
What is still allowed after 10 August 2026
The ban is narrow. It targets only new LRBAs for residential property. The full list of what remains permitted for SMSFs is worth being clear on.
Commercial and business real property LRBAs. SMSFs can still borrow to acquire commercial premises. A warehouse, factory, retail unit, office, or medical suite used wholly and exclusively in a business remains available under the existing LRBA rules. Business real property held via an LRBA can also be leased to a related party at arm’s length, which is one of the reasons small business owners often hold their business premises through their SMSF.
Share and managed fund LRBAs. SMSFs can still use LRBAs to acquire shares, ETFs, and managed funds, subject to the “single acquirable asset” rule. This means each holding requires its own separate LRBA structure and bare trust. It is generally more administratively complex and expensive than a property LRBA, and interest rates on these products tend to be higher, but the mechanism exists for SMSFs that want to gear into equities.
Residential property purchased outright. SMSFs holding residential property without borrowings are unaffected. Existing rental arrangements, tax treatment, and CGT rules continue unchanged.
Unit trusts and other indirect structures. Some SMSFs already access residential property exposure through unrelated unit trusts that own residential property. These structures were not directly targeted by the amendment. It is likely some capital that would have flowed into direct residential LRBAs will move toward these alternatives, though every structure has its own compliance requirements.
Tax treatment inside super. The change does not affect the tax rates that apply to super earnings. Investment earnings inside accumulation phase are still taxed at 15%. Earnings inside a retirement phase pension are still tax-free, subject to the $2.1 million Transfer Balance Cap from 1 July 2026. Super remains one of the most tax-effective investment structures for Australians in accumulation and pension phase, regardless of what happens to LRBAs.
Historical context: why LRBAs existed at all
Super funds are generally prohibited from borrowing. This has been the position since the Superannuation Industry (Supervision) Act 1993. The LRBA carve-out was introduced in 2007 as a specific exception, allowing super funds to borrow to acquire a single “acquirable asset” through a bare trust structure, with the lender’s recourse limited to that one asset.
The exception was expanded in 2010 to widen its practical use. Since then, several regulatory reviews have raised concerns:
- The 2014 Murray Financial System Inquiry recommended tightening or removing SMSF borrowing rules, citing the concentration risk of holding a single large asset with borrowed money inside retirement savings
- The Council of Financial Regulators raised similar concerns in 2019 and 2022, focused on leverage inside retirement vehicles
The 2014 recommendation was not acted on at the time. The current amendment is the first substantive move to close the exception, though it applies only to residential property. Commercial LRBAs remain available.
On the concentration risk point, Phil made an observation on the podcast that captures it well. Someone using an SMSF LRBA to buy residential property typically has to sell down every other holding in the fund (shares, cash, managed funds) to fund the deposit, then borrow against the property. That converts a diversified portfolio into a single physical asset exposed to fire, flood, theft, tenant issues, and localised market movements, with debt attached. Whatever the merits of the amendment, that is a real risk pattern that regulators have flagged for over a decade.
The likely unintended consequences
Whatever the intent of the ban, taking a buyer group out of a market has predictable second-order effects. Scott made the point on the podcast that historically, in financial markets, removing liquidity (buyers) never makes a market more efficient. It widens the spread between what sellers will accept and what remaining buyers will pay.
Three specific consequences are worth flagging as commentary, not prediction:
Rental supply reduction. The residential properties SMSFs hold under LRBAs are almost entirely in the long-term rental pool. SMSFs cannot occupy the property. The vast majority are not holiday homes sitting empty. Removing this buyer group from future property acquisitions reduces one source of new rental stock, which is the opposite of what the Greens argued they were trying to achieve for renters.
Commercial property pivot. Commercial LRBAs remain available. Some capital that would have gone into residential LRBAs will pivot to commercial property. Commercial property carries different, and in several respects greater, risks: smaller tenant pools, longer vacancy periods, more localised demand, and greater sensitivity to economic cycles. It is also cheaper to build, which has led to visible oversupply in some regional and outer-metropolitan areas.
Advertising ecosystem shift. A significant marketing industry has grown up around “buy property through your SMSF” advertising, particularly on Facebook and Instagram, and particularly in Queensland. Commissions embedded in these transactions have contributed to inflated pricing in some greenfield estates. That ecosystem will need to find another product. Whatever replaces it may or may not be an improvement.
Historical parallels are worth noting. The 1986 US tax reform triggered significant investor sell-offs. UK changes to landlord interest deductibility from 2017 to 2020 reduced rental stock. China’s “three red lines” policy in 2020 tightened developer financing and produced a multi-year property market freeze with widespread defaults. None of those are directly comparable, but taking a buyer group out of a market has consistently affected supply and pricing, not just demand.
What this means for retirement planning generally
For most Wealthlab clients, the SMSF LRBA change has limited direct impact. The majority of Australians approaching retirement do not hold their super in an SMSF, do not use LRBAs, and rely on APRA-regulated funds (industry funds, retail funds, wrap platforms) for their super accumulation and pension phase. Nothing about those arrangements has changed.
For the small number of Australians who were planning an SMSF-with-residential-LRBA strategy as part of their broader retirement plan, the ban is a genuine window closing. The strategy of building a leveraged property inside super, paying 15% tax on rental income during accumulation and 0% in pension phase, then either holding or selling the property tax-free in retirement, is no longer available for new purchases.
For those already in the middle of a purchase, the practical questions (contract timing, exchange dates, settlement, refinancing implications) are specialist territory that requires proper SMSF advice, and quickly.
Scott and Phil’s broader point on the podcast is worth keeping in mind. Policy changes to super happen every year. The role of any competent retirement plan is to adapt. There are still meaningful strategies for growing retirement wealth through geared investment, including outside super. And for most Australians, the core levers (concessional contributions, salary sacrifice, contribution splitting, investment mix, drawdown structuring) do more for retirement outcomes than any leveraged property strategy ever did.
Where Wealthlab sits on this
Wealthlab provides retirement planning, superannuation, and Age Pension advice. SMSF establishment and ongoing SMSF administration are outside our current scope of services. What we do work on is helping clients understand how their existing super (SMSF or otherwise) fits into their broader retirement plan, and building the plan around what they already have.
If your retirement strategy has been affected by the LRBA change, or if you were relying on an SMSF property purchase as part of your plan and need to rework the numbers, that broader retirement planning conversation is where we can help. For specific SMSF establishment, structure, or contract-timing questions, a specialist SMSF adviser or SMSF-focused accountant is the right conversation.
Frequently asked questions
When does the SMSF residential property ban start?
The ban commences on 10 August 2026, which is 45 days after Royal Assent was granted on 26 June 2026. From that date, SMSFs cannot enter new limited recourse borrowing arrangements to acquire residential property.
What is a limited recourse borrowing arrangement (LRBA)?
An LRBA is a specific legal structure that allowed a super fund to borrow money to buy a single asset. The lender’s recourse in a default was limited to that specific asset, protecting the fund’s other holdings. LRBAs were introduced as an exception to the general prohibition on super fund borrowing in 2007 and expanded in 2010.
Will my existing SMSF property loan be affected?
No. Existing LRBAs are fully grandfathered. The change is prospective only. If you currently hold residential property in your SMSF under an LRBA, the arrangement continues under its existing terms with no forced unwinding.
Can I refinance my existing SMSF residential property loan?
Refinancing existing LRBAs is explicitly permitted under the legislation. However, the ATO has not yet issued detailed guidance on when a refinance might be treated as a “new” arrangement, which is a technical question that could affect grandfathering. Before refinancing, specialist SMSF advice is generally recommended.
Can I still buy commercial property through my SMSF using a loan?
Yes. The ban applies only to residential property. LRBAs for business real property (commercial premises used wholly and exclusively in a business) remain available under existing rules. Mixed-use property that does not meet the “wholly and exclusively in a business” test is not classified as business real property and would not qualify.
What if I’ve already signed a contract but haven’t settled?
Contracts exchanged before 10 August 2026 are preserved under the legislation, even if settlement happens after the ban commences. This is confirmed in the amendment text. Given the compliance stakes, contract-timing questions should be run past a specialist SMSF adviser.
Why did the government ban SMSF property borrowing?
The Greens made the ban a condition of their Senate support for the government’s broader tax reform package, arguing that SMSF property purchases could let high-net-worth investors sidestep the tougher CGT rules applying outside super. The government also pointed to longstanding regulatory concern raised by the 2014 Murray Financial System Inquiry and Council of Financial Regulators warnings in 2019 and 2022 about leverage inside retirement savings.
Does the ban affect the tax rates inside SMSFs?
No. Income inside super is still taxed at 15% during accumulation and 0% inside a retirement phase pension, subject to the $2.1 million Transfer Balance Cap from 1 July 2026. The change is specifically limited to LRBAs for residential property, not the broader tax treatment of SMSFs.
Can I still borrow to buy shares through my SMSF?
Yes. LRBAs remain available for shares, ETFs, and managed funds, subject to the “single acquirable asset” rule. Each holding requires its own LRBA structure and bare trust, which makes these arrangements administratively heavier and typically more expensive than property LRBAs. Interest rates on share LRBA products are usually higher than mortgage rates.
What are the alternatives to SMSF residential property borrowing?
For clients whose retirement plan relied on this strategy, the alternatives generally fall into three categories: commercial property LRBAs (still permitted), gearing outside super (in personal or trust names, though the broader negative gearing changes now apply here), or shifting the retirement strategy away from leveraged property toward diversified super and personal investment growth. Which alternative fits depends on the individual’s circumstances, timeframe, and risk tolerance, and warrants proper advice.
Where next in our retirement guides
- How Retirement Works in Australia covers the three-pillar retirement system
- Superannuation strategies for accumulation and pension phase planning
- Pension and Centrelink planning covers Age Pension strategy
Your next step
If the SMSF LRBA change has knocked a hole in your retirement plan, or if you were planning to lean on this strategy and now need to rework the numbers, a broader retirement planning conversation is often where the useful thinking starts. Wealthlab focuses on retirement, superannuation, and Age Pension advice.
For SMSF-specific structural questions (contract timing, refinancing, grandfathering), a specialist SMSF adviser or SMSF-focused accountant is the right conversation.
If you want to talk through how the change affects your overall retirement plan, book a free chat with the Wealthlab team. No pressure, no jargon.
Not ready for a call? The free Wealthlab retirement quiz takes about 60 seconds and gives you a snapshot of where you stand.
