From 10 August 2026, new SMSF Limited Recourse Borrowing Arrangements (LRBAs) for real property are restricted to business real property. Existing arrangements, refinancing of eligible existing arrangements, and certain transactions under binding contracts exchanged before that date can continue under the transitional rules. This page walks trustees through what changed and where they now sit.
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The application of the transitional rules depends on the terms and dates of your particular arrangement. Confirm the legal, tax and SMSF compliance position with your accountant, financial adviser and solicitor before acting.
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026 and commenced on 10 August 2026. From that date, a new LRBA established by an SMSF to acquire real property must be for business real property within the meaning of section 66 of the SIS Act. LRBAs themselves are not banned — the restriction is on the type of real property that can be acquired under a new LRBA.
The change applies to new arrangements only. It does not require unwinding of residential property already owned by SMSFs or of existing residential SMSF loans. Transitional rules also preserve certain refinancing and in-flight transactions — details in the four scenarios below.
The legislation does not require you to unwind, restructure, or repay the loan early. Your existing arrangement continues under its original terms, and the change to the LRBA rules does not itself alter the SMSF's ability to hold and manage the property. Standard SMSF, taxation and loan requirements continue to apply.
The legislation preserves refinancing of borrowings under arrangements entered into before 10 August 2026. Lender policy and product availability vary. We can review the structure of your existing arrangement and the lending options available for your circumstances.
The transitional rules can protect a residential purchase where the acquisition happens under an arrangement entered into before 10 August 2026, even where settlement occurs after that date. For a standard property purchase, this will commonly involve a binding contract entered into before commencement. Note that a significant variation to the arrangement could create a new arrangement, so transactions around the cut-off date should be checked against the actual documentation before relying on the transitional protection.
New LRBA borrowing for ordinary residential investment property is generally not available unless the property meets the business-real-property requirements. Residential property may still be purchased by an SMSF without borrowing, and new LRBAs remain available for qualifying business real property. If you're considering an alternative investment strategy outside your SMSF, that should be discussed with your financial adviser. We can help you understand what lending options remain available and work alongside your accountant, adviser and solicitor.
The property must be used wholly and exclusively in one or more businesses at entry and throughout the LRBA. Property that meets this definition can include offices, warehouses, retail premises, medical suites and industrial property depending on their use and circumstances. Mixed-use property, vacant land, and property with any private or residential use may not qualify. Whether a specific property meets the business-real-property requirement should be confirmed with the fund's legal and accounting advisers before committing to the transaction. We can then assess the lending options and lender fit.
If you took out a residential SMSF loan before 10 August 2026, refinancing can remain protected under the transitional rules. Lender policy and product availability vary. We can review the structure of your existing arrangement and the refinancing options available for your circumstances.
SMSFs with sufficient available funds can still purchase residential investment property outright. The change is to the borrowing arrangement, not to residential property as an SMSF asset class. Whether purchasing residential property without borrowing is appropriate for a particular SMSF should be discussed with the fund's financial, accounting and legal advisers.
Evolution Lending Partners is a specialist SMSF lending brokerage. Since the August 2026 changes, our work covers four areas:
We coordinate with your accountant, adviser and solicitor throughout. If your situation doesn't fit the current lending environment, we'll tell you honestly rather than waste your time.
The change is now enacted law. Any future change would require further legislation. The transitional rules protect existing arrangements, and new LRBAs remain available where the property meets the business-real-property requirements.
The legislation specifically preserves refinancing of borrowings under arrangements entered into before 10 August 2026. The particular structure and lender requirements should still be checked before refinancing.
Yes, if your fund can pay for it outright without borrowing. The change is to the borrowing arrangement, not to residential property as an asset. SMSFs with sufficient available funds can still purchase residential investment property, subject to the usual SMSF rules.
Business real property is defined in section 66 of the SIS Act. Broadly, the property must be used wholly and exclusively in one or more businesses at entry and throughout the LRBA. Common examples include offices, retail shops, warehouses, factories, medical suites and industrial units. Mixed-use property, vacant land, and property with any private or residential use may not qualify. Some property that might be commonly described as residential can meet the definition in particular circumstances. Whether a specific property qualifies should be confirmed with the fund's legal and accounting advisers before committing to the transaction.
The legislation contains transitional protection where the property is acquired under an arrangement entered into before 10 August 2026, even if settlement occurs later. A significant variation to the arrangement after commencement could create a new arrangement. Transactions around the commencement date should be checked against the actual documentation.
Nothing in the transitional rules changes because of tenant issues. Your loan continues under its existing terms. Standard SMSF compliance rules around meeting loan repayments from fund cash still apply.
For the official position on the changes, see the ATO's guidance: Read the ATO's LRBA changes guidance →
If you're a trustee trying to work out where you stand after the changes, or you're weighing your options for future SMSF property strategy, book a conversation. No pressure, no obligation — just a clear picture of what's actually possible for your fund under the current lending rules.
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