Key date: 10 August 2026
  • New real-property LRBAs generally require business real property.
  • The change does not prohibit an SMSF from owning residential property outright without borrowing.
  • Existing and certain pre-commencement arrangements have transitional treatment.
  • Refinancing needs to be checked against the statutory transition rules and actual documents.

What changed?

Schedule 5 to the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 amended the LRBA provisions in the Superannuation Industry (Supervision) Act 1993. It commenced on 10 August 2026. For an acquirable asset that is real property, the amended rule generally requires the property to be business real property within the meaning of section 66 of the SIS Act.

What does that mean for residential investment property?

A new LRBA entered into after commencement generally cannot be used to acquire ordinary residential investment property unless a transitional provision applies. This is a borrowing restriction; it is not a general prohibition on an SMSF owning residential property acquired without borrowing, subject to the other superannuation rules.

Business real property remains potentially available

SMSFs may still use a qualifying LRBA to acquire real property that satisfies the statutory definition of business real property, assuming the other LRBA and superannuation requirements are met. The label “commercial property” is not conclusive: the statutory use test needs to be considered.

Pre-commencement arrangements

The Act contains application and transitional rules. Arrangements entered into before commencement and certain refinancing scenarios can require different treatment. The key is the legal character and timing of the actual borrowing and acquisition arrangements, not merely when a finance application was started.

Existing LRBAs

Do not assume an existing residential LRBA is invalid because the law changed. Existing arrangements are the subject of transitional protection, but refinancing, restructuring or changing the asset can create new questions that should be checked before documents are signed.

For transactions that remain permitted, the fund trustee, holding trustee, contract purchaser and lender documents need to align. Errors in purchaser identity, holding-trust timing or borrowing documentation can create problems independent of the 2026 reform.

The 2026 amendment does not remove other SMSF rules. Related-party acquisitions, arm’s-length dealing, sole-purpose requirements, investment strategy and non-arm’s-length income issues may still need advice.

What trustees should do now

  • Do not sign a real-property contract assuming old residential LRBA rules still apply.
  • For business property, confirm the asset satisfies the statutory definition.
  • For an existing LRBA refinance, obtain advice on the transition provisions before changing documents.
  • Have the fund deed, holding trust, contract and finance documents reviewed together.
  • Coordinate legal advice with the fund’s accountant and appropriately licensed financial adviser.

Official resources

Important: This article is general information only and is not legal, tax, financial or accounting advice. The legal outcome can depend on the documents, dates and facts. Obtain advice about your circumstances before acting, particularly where a statutory deadline applies.