SMSF Property Borrowing Ban: What Changes and When
A new restriction on limited recourse borrowing arrangements (LRBAs) — separate from, but attached to, the Budget's CGT and negative gearing overhaul.
If you've been weighing an SMSF property purchase using borrowed money, the question is no longer "should I?" — it's "do I have time left to sign a contract?"
What did the government just ban?
SMSFs are prohibited from entering new limited recourse borrowing arrangements (LRBAs) to acquire residential property. The change inserts a new condition into section 67A(2) of the Superannuation Industry (Supervision) Act 1993 — the provision that has allowed SMSFs to borrow for single-asset purchases since 2011.
What this means in practice: from the commencement date, an SMSF can no longer borrow to buy a house, unit, or other residential property. It can still buy residential property outright with existing fund capital.
When does the ban start?
| Event | Date |
|---|---|
| Amendment agreed with the Greens | 23 June 2026 |
| Bill passed both Houses of Parliament | 25 June 2026 |
| Royal Assent granted | 26 June 2026 |
| Ban commences (45 days after Royal Assent) | ~10 August 2026 |
Any new SMSF residential LRBA needs to be contracted before commencement to fall under the old rules.
Does this affect my existing SMSF loan?
No. The ban is prospective only. Existing LRBAs are grandfathered in full — nothing changes for arrangements already in place, and they don't need to be unwound or restructured.
Refinancing is also protected, provided it maintains or refinances a pre-commencement borrowing rather than establishing a new one.
What if I've already signed a contract but haven't settled?
You're protected. Acquisitions entered into before commencement are grandfathered even where settlement happens afterward. This is the specific purpose of the 45-day window — to let deals already in train reach settlement without being caught by the ban.
📌 The final legislative wording will confirm the precise evidentiary position (e.g. what counts as "entered into" for an off-the-plan purchase). Worth confirming your specific circumstances with us before relying on this.
Can my SMSF still borrow for a new build?
This is genuinely unclear at time of writing. The broader Budget package carves out new residential builds from the negative gearing restriction outside super — but commentary on this specific SMSF amendment has been inconsistent. The Shadow Assistant Treasurer has publicly stated the ban applies even to new builds, with no equivalent carve-out to the one that applies outside super.
Treat new-build SMSF borrowing as covered by the ban until the final legislative text confirms otherwise.
Can my SMSF still borrow for commercial property?
Yes. The ban is specific to residential property. LRBAs for business real property — the category that typically covers commercial premises — are unaffected.
Does this change how SMSFs are taxed on capital gains?
No. SMSFs retain their existing concessional CGT treatment in full:
10% effective rate on realised gains in accumulation phase
0% for members over 60 in pension phase
This measure is about borrowing capacity, not the fund's tax rate. It sits alongside — but doesn't alter — the CGT and negative gearing changes covered in [Negative Gearing and CGT: What's Changed and Who It Hits Hardest].
Why did this happen?
The Greens made the ban a condition of supporting the government's CGT and negative gearing package through the Senate, arguing SMSF property buyers compete with first home buyers at auction. The government has also pointed to longstanding regulatory concern — the 2014 Murray Financial System Inquiry and Council of Financial Regulators advice in 2019 and 2022 both flagged leverage inside superannuation.
The Treasurer has characterised the measure as narrow in effect: SMSF borrowing represents a small share of overall residential lending. Whatever its economic impact, it's now the legal position — the reasoning matters less than the deadline.
What should I do if I'm considering this strategy?
If contracts aren't signed yet: you have until approximately 10 August 2026 to exchange under the current rules. This is a tight window for something that normally involves fund establishment, lending approval, and conveyancing — talk to us now if this is live for you.
If you already have an LRBA: no action required. Your arrangement is unaffected.
If you're mid-purchase: confirm exactly where your contract sits against the "entered into before commencement" test — this is where the 45-day protection matters most.
Frequently Asked Questions
Is this the same as the negative gearing changes announced in the Budget? No. They're separate measures that happen to be in the same Bill. The negative gearing and CGT changes affect property held outside super and commence 1 July 2027. This SMSF borrowing ban is unrelated in substance, affects property held inside super, and commences roughly 11 months earlier.
Will the ban be reversed if there's a change of government? Unknown. This is genuinely a live policy question, not something we can predict. We'll update this article if the position changes.
Can I still set up an SMSF and buy property with cash? Yes. The ban only affects borrowing. Outright purchases inside an SMSF are unaffected.
What happens if my contract falls through after commencement and I want to re-sign? Based on the current position, a new contract signed after commencement would need to comply with the new rules — meaning no LRBA. We recommend confirming this with us directly given how much rides on the exact drafting.
This article reflects the legislation as passed and the Government's stated position as at July 2026. Final regulatory guidance from the ATO or ASIC may clarify outstanding questions, including the new-build treatment. This is general information only and does not constitute financial, legal, or tax advice — speak with us before acting on an SMSF borrowing strategy.