As of 25 June 2026, the Australian Government has announced its support for an amendment that would ban future Limited Recourse Borrowing Arrangements (LRBAs) for residential property investments by superannuation funds, including Self Managed Super Funds (SMSFs). While the proposal has generated significant discussion across the property and superannuation sectors, it is important to understand that the measure has been announced but is not yet law.
For many SMSF trustees and investors, this represents one of the most significant changes to SMSF property investment rules in recent years.
What Is an LRBA?
A Limited Recourse Borrowing Arrangement allows an SMSF to borrow money to purchase an asset, typically residential or commercial property. Under this structure, the lender’s rights are generally limited to the purchased asset if the loan defaults.
LRBAs have become a popular strategy for SMSF investors seeking to leverage their superannuation savings to acquire property and build long term wealth within a tax effective environment.
What Has the Government Announced?
On 23 June 2026, the Federal Government agreed to support an amendment that would prohibit new LRBAs for residential property investments by superannuation funds. The proposal forms part of a broader agreement reached with the Greens to secure support for wider tax reform measures.
The Government has stated that concerns around investor risk and retirement savings protection contributed to the decision. Previous reviews, including the Murray Financial System Inquiry, raised questions regarding the risks associated with borrowing inside superannuation structures.
What Will Change?
If the amendment becomes law, the following changes are expected:
• New SMSF loans for residential property purchases will no longer be permitted.
• Existing residential property LRBAs will be grandfathered and allowed to continue.
• Commercial property borrowing through SMSFs is expected to remain available.
• SMSFs will still be able to purchase residential property outright using available fund balances without borrowing.
• Current superannuation tax concessions will remain unchanged.
Will Existing SMSF Property Loans Be Affected?
No.
Based on the Government’s announcement, existing residential property loans held within SMSFs will not be impacted. Trustees with current LRBAs are expected to continue operating under existing arrangements without being forced to sell assets or unwind loan structures.
In addition, a transition period is expected to apply for transactions already underway before the legislation takes effect. Current indications suggest a 45 day window following Royal Assent for arrangements already in progress.
How Could This Impact SMSF Investors?
The proposed ban may significantly alter how future SMSF investors approach property investment.
For many trustees, residential property purchased through an LRBA has been a key strategy for building retirement wealth. Removing access to borrowing may reduce opportunities for investors who rely on leverage to acquire higher value assets.
At the same time, SMSFs will still have several investment options available, including:
• Direct property purchases using existing SMSF funds.
• Commercial property investments.
• Australian and international shares.
• Managed funds and ETFs.
• Fixed income investments and cash holdings.
Trustees may need to reassess their longterm investment strategies and consider alternative approaches that align with their retirement objectives.
Industry Response
The announcement has attracted mixed reactions across the financial services industry.
Several industry groups have expressed concern that the decision was introduced without extensive consultation and argue that previous reviews found SMSF borrowing posed limited systemic risk. Others support the change, suggesting it may help reduce investment risk within retirement savings structures.
There is also ongoing debate regarding whether the change will have any meaningful impact on housing affordability, given that SMSF borrowing represents only a small portion of Australia’s residential lending market.
What Should SMSF Trustees Do Now?
At this stage, trustees should avoid making decisions based solely on media headlines.
The proposal has been announced but has not yet passed Parliament. Further details may change before legislation is finalised.
SMSF trustees considering a residential property purchase through borrowing should seek professional advice as soon as possible to understand how the proposed changes may affect their plans.
Final Thoughts
The proposed ban on future residential property LRBAs marks a major shift in Australia’s SMSF investment landscape. While existing arrangements are expected to remain protected, future investors may face new limitations when using superannuation to invest in residential property.
As legislation progresses, staying informed and obtaining tailored advice will be essential for SMSF trustees looking to protect and grow their retirement savings.
At R G Partners, we help SMSF trustees navigate legislative changes, compliance obligations and investment strategies with confidence. If you would like advice on how these proposed reforms may affect your SMSF, contact our team today.
