SMSF Borrowing Banned: What the Labor-Greens LRBA Deal Means for You

Updated 24 June 2026 — now includes analysis of the proposed amendment text tabled in the Senate.

The government has struck a deal with the Greens — and if you’ve been planning to buy residential property inside your SMSF using a limited recourse borrowing arrangement (LRBA), the clock is now ticking.

On 23 June 2026, Prime Minister Anthony Albanese and Treasurer Jim Chalmers confirmed they have agreed to an amendment that will ban SMSFs from entering new LRBAs to acquire residential property. The change is the price the Greens extracted for their Senate support of the government’s broader Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 — the legislation that overhauls the CGT discount and negative gearing rules.

We now have the proposed amendment text. Here is everything confirmed, and what it means for you.

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What the Legislation Actually Says

The amendment — tabled by Senator Nick McKim on behalf of the Australian Greens on 23 June 2026 — makes a single operative change to the Superannuation Industry (Supervision) Act 1993. It inserts a new paragraph (c) into subsection 67A(2), which sets out the conditions an LRBA must meet to be permitted. The new condition reads:

“for an asset that is real property — the asset is business real property (within the meaning of section 66 of this Act).”

That is the entire operative change. From commencement, an SMSF can only use an LRBA to acquire real property if that property is business real property as defined in the SIS Act. Residential property is excluded because it does not meet that definition.

The commencement date is the 45th day after this Act receives Royal Assent — inserting a new Schedule 5, item 7 into the bill’s commencement table.

The full amendment text is available on the Parliament of Australia website.

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What Is “Business Real Property”?

This is a critical distinction that most reporting has missed.

The amendment does not simply say “commercial property” — it uses the specific legal term “business real property” as defined in section 66 of the SIS Act. The two are not the same.

Business real property under section 66 generally means real property used wholly and exclusively in one or more businesses. This means:

• An office building leased to a business: yes, qualifies
• A factory, warehouse or industrial property used in a business: yes, qualifies
• The business premises your own company operates from: yes, qualifies (and remains one of the best SMSF strategies available)
• A vacant commercial block not currently used in a business: may not qualify
• A mixed-use property with a residential component: may not qualify (or only qualify in part)
• Residential property of any kind: does not qualify

If you are considering an LRBA for non-residential property after the ban, you need to confirm with your adviser that the specific property meets the section 66 definition — “commercial” alone is not sufficient.

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The Key Confirmed Details

What	Detail
What’s banned	New LRBAs to acquire real property that is not business real property — in practice, residential property
Legal mechanism	New paragraph 67A(2)(c) inserted into the SIS Act
Existing LRBAs	Fully protected — not affected
Refinancing existing LRBAs	Explicitly permitted — the amendment does not apply to “maintaining or refinancing a borrowing under another arrangement entered into before commencement”
Contract date as trigger	Confirmed — if contracts were exchanged before commencement, the ban does not apply even if settlement occurs after
Settlement after commencement	Explicitly covered — “even if the settlement for the acquisition of the asset happens after that commencement”
Business real property LRBAs	Confirmed still available
Commencement	45th day after Royal Assent — mid-August 2026
Ministerial discretion	Not included — no future minister can reverse the restriction by regulation

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What Was Previously Unknown — Now Resolved

Refinancing: confirmed permitted

This was the biggest open question. The legislation is unambiguous: the amendment does not apply to “maintaining (or refinancing) a borrowing of money under another arrangement entered into before that commencement.” If you have an existing residential LRBA and your lender withdraws from the market or becomes uncompetitive, you can refinance to another lender. Your grandfathering is not lost by refinancing.

Settlement after commencement: explicitly protected

The Note to the application clause states clearly: “a borrowing arrangement for which the related asset is acquired under an arrangement entered into before that commencement (even if the settlement for the acquisition of the asset happens after that commencement).”

If you exchanged contracts before mid-August, you can settle months later — after the ban is in force — and you are still protected. The trigger is the date you entered into the acquisition arrangement (exchange of contracts), not settlement.

The “commercial property” carve-out is narrower than reported

Reporting has consistently said “commercial property LRBAs remain available.” That is broadly correct — but the legal test is “business real property,” which is more specific. Do not assume any non-residential property automatically qualifies. Get specific advice on the property you have in mind.

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A Broken Promise

This is a direct reversal of an explicit government commitment. As recently as May 2025, Labor stated it had “no intention” of banning LRBAs when the Greens demanded exactly the same deal in exchange for their support of the Division 296 superannuation tax legislation. Chalmers said no then. He has now agreed to pass the same measure to secure his budget through the Senate.

David Busoli, principal of SMSF Alliance, called it for what it is:

“The Greens have been implacably opposed to SMSFs generally and limited recourse borrowing in particular. The use of LRBAs has been, in the main, appropriate and a legitimate vehicle for superannuation members to build their retirement savings.”

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Who Is Affected

The Greens framed this as closing a loophole for “wealthy property investors.” The ATO data tells a different story.

• LRBAs were most common among SMSFs with balances between $500,000 and $1 million — not the ultra-wealthy
• 41% of SMSFs owned residential property in 2023–24 (including those who bought without an LRBA)

Melbourne-based financial adviser Lincoln Holland put it plainly. He uses LRBAs primarily for divorced women:

“The strategy is to buy a place now where they may want to live in retirement, or at least they will have an asset in direct property that they can sell in the future and buy in the same market at the same time. They use their employer contributions and rent to pay it off. This will condemn these people to a life of renting in retirement. What a shocker.”

Meg Heffron, managing director of Heffron, highlighted another cohort:

“With housing becoming more unaffordable, people have explored other options to get a foothold in property. In particular, the high level of compulsory super means a young high-earning couple might have a lot of money in super and relatively little outside it.”

You are NOT affected if:
– You already have an LRBA in place — your existing arrangement is fully grandfathered
– You want to refinance an existing LRBA — explicitly permitted under the legislation
– Your SMSF owns residential property outright (no borrowings)
– You are considering an LRBA for business real property — confirmed unaffected

You may be affected if:
– You are currently mid-process on a residential LRBA — exchange contracts before commencement (mid-August); settlement can occur after
– You were planning to use an LRBA to buy residential property in the future

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If You’re Mid-Process Right Now

If you’ve already started the process of buying residential property inside your SMSF using borrowings, exchange contracts as quickly as possible.

The legislation is explicit: if you enter into an acquisition arrangement (exchange contracts) before commencement, you are protected — even if settlement happens after the ban takes effect. The commencement date is the 45th day after Royal Assent. The bill is expected to pass the Senate before 2 July 2026, putting the effective ban date in mid-August 2026.

The practical risk is not the legal deadline — it is the lenders. When Bill Shorten floated a similar policy in 2019, all four major banks withdrew their SMSF residential lending products before any law passed. The announcement alone killed the market. If you are waiting to act, the loan product you need may disappear before mid-August.

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The Politics of It

SMSFs represent less than 1 per cent of residential property borrowing. This change raises $50 million over four years — roughly one-fiftieth of the revenue from the broader tax package it was traded for. It will not build a single home or reduce prices.

Shadow Treasurer Tim Wilson:

“Jim Chalmers no longer knows what’s in his budget. The Greens are dictating the terms.”

The Council of Financial Regulators’ 2022 concern was specifically about low-balance SMSFs with high asset concentration and personal guarantees — not a broad systemic risk. Peter Burgess, CEO of the SMSF Association:

“Review after review has found LRBAs pose no material risk to the superannuation system. Banning LRBAs for residential property represents a clear departure from nearly two decades of settled policy. If property spruikers and high-pressure sales tactics are the issue, the answer is to target that conduct directly.”

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What Are Your Alternatives?

The ban applies to new residential LRBAs only. The SMSF structure itself remains the most tax-effective investment vehicle in Australia — 15% on income during accumulation, 0% in pension phase, and the one-third CGT discount preserved.

Following the 2026 Budget, an SMSF is now the only structure in which you can purchase an existing residential property as an investment and still negatively gear it. The tax case for property inside super has not weakened — only the borrowing pathway has closed for residential.

1. Business Real Property via LRBA — Confirmed Still Available

LRBAs for property meeting the section 66 SIS Act definition of business real property are explicitly preserved by the amendment. This includes commercial, industrial and business premises used wholly and exclusively in a business.

For business owners, this remains one of the most compelling strategies in Australia: borrow inside your SMSF to buy the premises your business operates from, lease it back at market rent, pay 15% tax on that income in accumulation (0% in pension phase), and grow the asset in a concessionally taxed environment protected from personal creditors.

Important: confirm the specific property meets the section 66 “business real property” definition before proceeding — “commercial” alone is not the legal test.

2. Fixed Unit Trust with External Borrowings

A well-structured fixed unit trust allows your SMSF to hold property indirectly while personal investors borrow against their own units.

• The SMSF acquires units using fund assets — no borrowing inside the SMSF
• Co-investors (e.g. members personally) hold units and borrow against them personally
• The underlying property sits in the trust, unencumbered at the SMSF level
• The SMSF can gradually acquire more units over time as co-investors’ loans are repaid

The trust must qualify as a fixed trust and must not constitute an in-house asset of the SMSF. Specialist advice is essential.

3. Tenants in Common (Unencumbered)

Your SMSF can purchase property as a tenant in common alongside individuals who hold their own share. The SMSF’s share must be purchased without borrowing; individual co-owners can use personal finance against their own interest.

No borrowing can be secured against the property title itself. Works best where the SMSF has strong cash reserves.

4. Superannuation Unrelated Investment Trust (SUIT)

A SUIT is structured so that no single party or related party group holds more than 50% of the units. With three or more genuinely unrelated SMSF investors:

• No in-house asset restrictions apply
• The trust itself can borrow with property as security
• Multiple funds pool capital — opening up larger, better-quality assets
• Development opportunities become accessible

This is the most powerful alternative for investors who want leveraged property exposure inside super and are willing to collaborate with unrelated parties. Three or more investors is preferable to ensure no party approaches 50%.

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What Hasn’t Changed

• Tax rates — 15% accumulation, 0% pension phase
• CGT discount — one-third discount preserved (10% effective rate in accumulation, 0% in pension)
• Business real property LRBAs — confirmed unaffected
• Negative gearing inside SMSF — SMSFs remain the only structure where you can negatively gear a new purchase of existing residential property
• Shares, ETFs, managed funds — completely unaffected
• Existing residential LRBAs — fully grandfathered, including refinancing
• Division 296 — already law from 1 July 2026 for balances above $3 million

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Next Steps

1. If you are mid-process on a residential LRBA — exchange contracts before mid-August. Settlement can occur after commencement. Do not wait for lenders — they may pull products before the legal deadline.
2. If you were planning a residential LRBA — the window is closing. Get immediate advice and move before lenders exit the market.
3. If you hold an existing residential LRBA — you are protected, including for future refinancing. Do not restructure unnecessarily until you have specific advice.
4. If you are interested in business real property — confirmed unaffected. Verify the specific property meets the section 66 definition.
5. If you want leveraged property exposure inside super — speak to us about the SUIT structure and fixed unit trust options.

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Updated 24 June 2026 to incorporate analysis of the proposed amendment text (Senate Amendment 3886, moved by Senator McKim). The bill has not yet passed the Senate. This is general information only and does not constitute financial or legal advice. Speak to a qualified SMSF specialist before making any decisions.

Sources: Senate Amendment 3886 — McKim (Greens) | Prime Minister’s Office statement | AFR — SMSF property plans shattered by Labor-Greens budget deal | ABC News