The Federal Government’s recent tax reforms include an important change for self-managed superannuation funds (SMSFs) investing in property.
SMSFs will no longer be able to enter into new Limited Recourse Borrowing Arrangements (LRBAs) to acquire residential property. The change forms part of the broader tax reform package that passed Parliament and received Royal Assent on 26 June 2026.
An LRBA is the borrowing structure that has allowed SMSFs to borrow money to purchase certain assets, which notably included residential properties, while limiting the lender’s recourse to that specific asset. Put simply, this means that if the loan could not be repaid, the lender’s claim is generally limited to the asset purchased with that loan (i.e. the property), rather than the fund’s other assets. Under the new rules, this strategy will no longer be available for new residential property purchases once the commencement date arrives.
Importantly, this does not mean SMSFs are banned from owning residential property. SMSFs can still purchase residential property where they have sufficient cash available and where the investment complies with the fund’s trust deed, investment strategy and superannuation rules. The change specifically restricts the use of new borrowings through an LRBA to acquire residential property.
If you have questions about SMSF property investment, existing borrowing arrangements or how this change may affect your retirement strategy, please contact your advisor.