If you’ve been weighing up whether your SMSF should borrow to buy property, the rules of the game have just changed. On 25 June 2026, Parliament passed amendments to the Limited Recourse Borrowing Arrangement (LRBA) provisions of the Superannuation Industry (Supervision) Act 1993, with Royal Assent granted the following day. The new rules commence on 10 August 2026 — and from that date, SMSFs will no longer be able to enter new LRBAs to acquire residential property.

For trustees, advisers and anyone who has been considering an SMSF property purchase, this is one of the most significant changes to superannuation borrowing since LRBAs were first introduced in 2007. Here’s what actually changed, what’s protected, and what it means for your SMSF strategy going forward.

What actually changed

The amendment makes a single, precise change to the law. It inserts a new condition into subsection 67A(2) of the SIS Act, which sets out what an SMSF is permitted to borrow to acquire under an LRBA. The new condition requires that, where the asset being acquired is real property, that property must qualify as “business real property” as defined in section 66 of the SIS Act.

In practice, that means residential investment properties — houses, units, apartments and similar dwellings not used in a business — are excluded from being acquired through a new LRBA from 10 August 2026 onward. Property genuinely used in a business, such as a commercial office, warehouse, retail premises, or a farm used to carry on a business, can still be acquired via an LRBA, provided it meets the business real property test.

What’s grandfathered — and what isn’t

This is a prospective change only. It does not unwind or affect anything already in place, and there’s no requirement to restructure or exit an existing arrangement.

Because the operative test is “business real property” rather than a simple residential-versus-commercial split, the outcome isn’t always intuitive. Some residential-style property can still qualify if it’s genuinely used in a business, while some property that looks commercial may not meet the test if it isn’t used wholly or mainly in a business. Getting this classification right before entering an arrangement will matter more than ever.

Why this matters for your SMSF strategy

LRBAs have been the only mechanism available under the SIS Act for an SMSF to borrow money to acquire an asset, and residential property purchases have been one of the most common uses of that structure for close to two decades. This change closes that door for new arrangements, while deliberately leaving the door open for SMSFs to borrow for genuine business premises.

If you’re mid-purchase

If you’ve already exchanged contracts on a residential property, or you’re in the process of setting up a bare trust and LRBA structure, timing is now critical. Arrangements entered into before 10 August 2026 remain valid even if settlement happens later, but the underlying conditions need to be satisfied properly — this isn’t a case of simply signing a document before the deadline.

If you’re considering business real property

For trustees running a business, or looking to bring existing business premises into the fund, this change doesn’t close off the LRBA strategy at all. Borrowing to acquire qualifying business real property — and structuring it correctly through a bare trust — remains a genuine option after 10 August 2026, and in some respects the pathway is unaffected.

If you were planning a residential purchase for later in the year

If a residential property acquisition through an LRBA was on your radar but hasn’t been contracted yet, that strategy is no longer available once the new rules commence. It’s worth speaking with your SMSF accountant now about what your remaining options look like, including whether the property still makes sense to purchase outside of super.

What to do next

1. Review any residential property purchase currently in progress through your SMSF and confirm where it sits against the 10 August 2026 commencement date.
2. If you’re planning to bring business premises into your fund, get the business real property classification checked before you proceed.
3. If you have an existing LRBA, note that it’s unaffected — but confirm your refinancing options are understood in case your loan term comes up for renewal.
4. Speak with an SMSF specialist before making any decisions — this is new law, and further ATO guidance is still being finalised.

At autoSMSF, we set up SMSFs, manage annual compliance, and establish bare trusts for property purchases — without ever selling financial advice or lending products. If you need clarity on where your SMSF stands under the new LRBA rules, our team can walk you through it on a fixed, transparent fee.

Bimal Sekhon

Chartered Accountant, SMSF Association Member — Founder, autoSMSF