SMSF Borrowing Changes Now Law
We recently provided an update regarding proposed changes to SMSF borrowing arrangements.
The legislation has now been passed and received Royal Assent.
From 10 August 2026, the rules for limited recourse borrowing arrangements (LRBAs) will change. In broad terms, where a SMSF uses borrowing to acquire real property, that property will need to be “business real property”.
Business real property is broadly real property used wholly and exclusively in one or more businesses.
For most clients, the key impact is that new SMSF borrowing arrangements for standard residential investment properties will no longer be available from 10 August 2026.
Borrowing for business real property may still be available, subject to the normal SMSF rules. These arrangements remain complex and need to be considered carefully, including the business real property definition, related party rules, market value requirements, leasing arrangements and the fund’s investment strategy.
Existing arrangements and certain arrangements already in progress may be protected by transitional rules. However, clients should not assume this applies without advice, particularly where contracts, finance approvals, bare trust documents or settlement steps are still being finalised.
What should clients do now?
If you are considering a SMSF property purchase using borrowing, it is important to obtain advice before proceeding.
This is particularly important where the property is residential, or where you are trying to determine whether an existing or in-progress arrangement falls within the transitional rules.
This article is general information only and should not be relied on as advice. SMSF borrowing arrangements are complex and advice should be sought before acting.
– Brad Sheaves
Posted 1.07.2026
This article is compiled as a helpful guide for your private information and is subject to copyright. We suggest that you do not act solely on the basis of material contained in this article because items are of general nature only and may be liable to misinterpretation in particular circumstances. We recommend that our advice be sought before acting on any of these crucial areas.
