The Federal Government has now legislated a ban on new borrowing by super funds to purchase residential property — which in practice affects self-managed super funds (SMSFs), the only funds that use these arrangements. Here's what it means, the cut-off that matters, and who is — and isn't — affected.

In a nutshell

What: New limited recourse borrowing arrangements (LRBAs) used to buy residential property inside super are prohibited.

When: The law received Royal Assent on 26 June 2026 and the ban commences 10 August 2026 (45 days after assent). To be protected, a purchase contract must be exchanged on or before 9 August 2026.

Who's affected: Only new arrangements. Property your SMSF already owns, and loans already in place, are not affected.

Action: If you're considering a geared SMSF property purchase, the window is closing — please talk to us.

What's changing

As part of the deal to pass its wider budget and tax reforms through the Senate, the Government has legislated a ban on new limited recourse borrowing arrangements (LRBAs) by superannuation funds for residential property (Treasury Laws Amendment (Tax Reform No. 1) Act 2026, Schedule 5). Because LRBAs are used almost exclusively by SMSFs, this effectively ends the ability to borrow inside an SMSF to buy a residential investment property.

An LRBA is the one form of borrowing super funds are generally allowed to use — the loan is secured only against the property it buys. The measure targets residential property; the legislation does not extend to borrowing for commercial or business real property (for example, a business premises held in your SMSF), which remains available.

Key dates and the cut-off

The legislation passed Parliament and received Royal Assent on 26 June 2026. The ban takes effect 45 days later — on 10 August 2026.

To be protected (grandfathered), a purchase contract must be exchanged on or before 9 August 2026. Settlement can occur after that date, provided the contract was exchanged in time.

There is therefore a limited — and now short — window in which a new arrangement can still be put in place.

What is not affected

The change is prospective only — it does not unwind anything already in place. Specifically:

  • Residential property your SMSF already owns is not affected.
  • Existing LRBAs / loans already in place continue unchanged.
  • Contracts exchanged on or before 9 August 2026 are protected — arrangements already "in train" can be completed.
  • The tax treatment of super is not changing. Super funds (including SMSFs) keep their concessional treatment — broadly a 10% tax rate on capital gains where assets are sold, and nil tax for members over 60 once the fund is in pension phase.

The bigger picture

This sits alongside broader Budget changes to property tax concessions (including the capital gains tax discount and negative gearing for new investments). Those changes don't alter how super itself is taxed — super funds were otherwise exempt from the Budget's CGT changes — and the Government notes that fewer than 1% of residential property loans were made through SMSFs.

What this means for you

Already hold residential property in your SMSF: No action required — you are not affected, with or without a loan.

Part-way through, or seriously considering, a geared SMSF property purchase: The window is closing. To be protected, a contract generally needs to be in place before the ban starts — please contact us as soon as possible.

SMSF property gearing was part of your longer-term plan: This strategy won't be available for new arrangements. Let's review your options and talk through alternatives.

You have an SMSF generally: A good prompt to revisit your fund's investment strategy at your next review.

We're here to help. If you'd like to understand how these changes affect your situation — or you're weighing up an SMSF property purchase — please get in touch and we'll talk it through.

Navarino Wealth is an Authorised Representative (No. 377 450) of PFP Financial Services Pty Ltd, AFSL 535484. This article contains general information only and does not take into account your objectives, financial situation or needs. It is based on the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Schedule 5), which received Royal Assent on 26 June 2026, with the ban commencing 10 August 2026. Current as at 1 July 2026. You should consider whether the information is appropriate for your circumstances, and obtain personal financial (and, where relevant, taxation) advice, before acting on it.