SMSF residential property loans are about to be banned, here's what you need to know
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Thinking about using your SMSF to buy property? Already got one? Either way, this affects you.
Parliament passed a tax bill on Thursday (25 June) that bans SMSFs from borrowing to buy residential property.
This came through as part of a bigger tax reform bill, one already set to make major changes to the capital gains tax discount and negative gearing rules. To get the Greens' support for it in the Senate, the government reportedly added the SMSF residential lending ban as a concession. The bill passed the Senate first, then the House of Representatives 98 votes to 39.
Quick refresher: what's an LRBA?
If you're not across the jargon, an LRBA (Limited Recourse Borrowing Arrangement) is how SMSFs borrow to buy property. The property sits in a separate trust, so if the loan goes bad, the bank can only come after that one property, not the rest of your super. It's been around since 2007 and a lot of people, especially younger trustees, have used it to get into property using their super as leverage.
So what's actually changing?
No new residential loans. Once this kicks in, your SMSF can't borrow to buy a house or unit anymore.
Commercial property is fine. You can still borrow through your SMSF to buy commercial property, whether that's for your own business or just as an investment. One catch: mixed-use buildings (shop downstairs, apartment upstairs) might not count as "commercial" unless they pass a specific legal test, so check with your accountant if that's your situation.
Already got a loan? You're fine. Existing SMSF property loans aren't touched. You don't have to sell or restructure anything.
Already signed a contract? Also fine. As long as you exchange contracts before the law kicks in, you're protected, even if settlement happens after.
Why people are annoyed
The Treasurer says this will save the budget about $50 million over a few years and points out SMSF loans are a tiny slice of the market, under 1% of all home loans. He's also pointed to a 2014 review that recommended this exact change.
But the SMSF industry isn't happy. Their argument: this is a big change that got slipped in through a late amendment, skipping the consultation process something this significant should normally go through. The Liberals have piled on too, saying the government caved to the Greens and that this will lock ordinary people out of a strategy they've used legitimately for years. The mortgage broker association has said much the same thing.
The part that actually matters to you: the clock
You've got 45 days after the bill gets formal sign-off (Royal Assent) before this becomes law. That puts the cut-off around mid-August 2026.
Sounds like plenty of time. It isn't, really. Here's why:
The only thing that protects you is exchanging contracts before the cut-off. You don't need finance sorted by then, just contracts exchanged. But to exchange contracts, you need your SMSF and trust structure already set up. That's the part that takes time.
And here's a trap a lot of people don't know about: in some states, if you set up the bare trust after you've already signed the contract, you can get hit with double stamp duty. It's treated as two separate sales. The rules are different in every state, so don't try to wing this. Talk to an accountant who actually knows SMSF structures before you sign anything.
If you're already looking at a property and have finance mostly sorted, most accountants can set up the SMSF and trust within a few days. But if you're thinking about this, don't sit on it.
My take
This won't affect anyone who's already set up, but it shuts the door on something that's been a legitimate, well-used strategy for almost 20 years, for regular people, not just wealthy investors. You can debate whether the policy itself is good or bad. What's harder to defend is how it happened: tacked onto a bill at the last minute, with no real consultation, for something this structural.
My guess is this pushes more people toward commercial property instead, since that door is still wide open. And for those who still want residential exposure through their SMSF, I wouldn't be surprised if we start seeing more creative structuring to try and achieve a similar outcome without technically being an LRBA.
Disclaimer: This is general information only, based on publicly available sources as at 26 June 2026. It isn't financial, legal, or tax advice. Speak to a licensed SMSF professional before making any decisions.
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Disclaimer
Real Accounting does not hold an Australian Financial Services Licence (AFSL) and does not provide financial product advice. This article contains general information only and does not take into account your objectives, financial situation, or needs. Before establishing an SMSF or implementing any borrowing arrangement, you may wish to seek advice from a licensed financial adviser to assess whether it is appropriate for your circumstances.
