SMSF Property Borrowing Checker — the LRBA Ban Now In Force

Is the SMSF residential property borrowing ban now in force?

Yes. The ban commenced on Monday 10 August 2026 — the 45th day after Schedule 5 of the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Act No. 49 of 2026) received Royal Assent on Friday 26 June 2026. To rely on transitional relief a fund had to exchange a binding contract to acquire the property before that date; an accepted offer, a heads of agreement or a paid holding deposit was never enough. The last day under the old rules was Sunday 9 August 2026, and because conveyancing does not happen on a weekend the practical deadline was Friday 7 August 2026. That window has closed and there is no extension mechanism in the Act. What has not changed is the position of funds that exchanged in time: their relief survives, and it does not lapse because settlement or finance is still outstanding.

You exchanged before the deadline but have not settled — are you still protected?

Yes — and this is where most of the advice circulating in June and July 2026 is out of date. ATO guidance released on 28 July 2026 confirmed that transitional relief turns on the exchange of a binding contract before 10 August 2026, and that it applies even if the contract is settled, or the LRBA is entered into, on or after that date. It went further: whether loan approval was obtained before or after 10 August is irrelevant, so loan approval, documentation and drawdown can all follow commencement. Off-the-plan purchases are assessed the same way, which matters because their completion may be years off. The bare trust is a separate question — it is not the ban’s test, but it is normally required before exchange so that the correct entity is named as purchaser and any state stamp-duty concession is preserved. The flexibility the ATO granted is about the loan, not about the structure.

Why “residential property ban” understates what changed

The Act does not work by defining residential property and prohibiting it. It works by limiting the real property an SMSF may acquire under a new LRBA to business real property — an eligible interest in land used wholly and exclusively in one or more businesses. Everything that is not business real property falls out, which is a wider net than “houses and units”. Vacant land that is not being used in a business fails. A lifestyle block fails. A single title carrying a genuine residential component — the classic office or shop with an occupied flat above — fails, because the land is then no longer used wholly and exclusively in a business. Farmland keeps a carve-out: a private dwelling such as a farm manager’s homestead does not break the test where the residential footprint is no more than 2 hectares and the dominant use remains primary production. Acquirable assets that are not real property, such as listed shares or units in a widely held trust, are untouched by any of this.

What happens to loans that already exist?

They continue. LRBAs entered into before 10 August 2026 are grandfathered under the current rules, with no sunset date and no wind-up requirement — the Government was explicit that existing arrangements would not be unwound. A fund is not required to sell the property or repay the loan early, and the arrangement can run to natural completion. Refinancing is also protected: the ATO confirmed that refinancing a pre-ban LRBA after 10 August 2026 does not give rise to a new LRBA subject to the ban, because it does not create a new contract date for the underlying acquisition, and that where the financed asset is real property it does not need to be business real property in order to be refinanced. The ordinary LRBA requirements still apply to the new borrowing, and a restructure substantial enough to be a new arrangement rather than a refinance sits outside this relief.

What can an SMSF still do now the ban has commenced?

The ban is on borrowing, not on ownership. An SMSF can still acquire residential property outright with the fund’s own cash, and it keeps every residential property it already holds. It can still enter a new LRBA over business real property — commercial premises leased to a business, including an unrelated tenant, remain available, and a temporary vacancy while the owner looks for a new tenant does not by itself break the test. Non-real-property acquirable assets are unaffected. The one durable trap is timing: the ATO stated that the asset must be business real property both when the LRBA is entered into and for the entire life of the LRBA, so a commercial property later converted to residential use, or a redevelopment that introduces a dwelling onto the title, can put an originally compliant borrowing offside years after settlement. Check the intended use across the whole loan term. Every purchase also remains subject to the ordinary superannuation rules — the sole purpose test, arm’s length dealing, and the prohibition on acquiring residential property from a related party.

Assumptions and limits of this checker

Labelled so you can judge the output. (1) It applies the commencement date of 10 August 2026, calculated as the 45th day after Royal Assent on 26 June 2026, and treats that date as passed. (2) It treats the exchange of a binding contract as the transitional test, per the ATO guidance released 28 July 2026 — note that some adviser commentary instead states the borrowing itself had to be established before commencement; this checker follows the ATO guidance and the statutory carve-out, which is keyed to the arrangement under which the asset is acquired. (3) The business real property outcome is driven by the property type you select; the real test is actual use, which only an adviser looking at the specific title and tenancy can confirm — a property described as commercial may still fail, and a property described as mixed use may pass if the residential part is genuinely not used privately. (4) It does not assess whether the borrowing satisfies the other LRBA requirements, the sole purpose test, related-party acquisition rules, in-house asset rules or state stamp duty. (5) The treatment of significant post-exchange contract variations is unsettled — the ATO has said a contract changed so fundamentally that its original terms no longer exist may be a new arrangement, and the SMSF Association has asked for further clarity. This is general information, not tax, legal or financial advice; an SMSF property decision of this size should be checked with a licensed adviser before you act.

Sources

• Treasury Laws Amendment (Tax Reform No. 1) Act 2026 — Act No. 49 of 2026, Schedule 5 “Limited recourse borrowing arrangements”; Royal Assent 26 June 2026; the LRBA measure commenced on the 45th day afterwards, Monday 10 August 2026. (Federal Register of Legislation, C2026A00049.)
• Superannuation Industry (Supervision) Act 1993 — s 67A(2)(c), inserted by the above: “for an asset that is real property — the asset is business real property (within the meaning of section 66 of this Act)”; s 66 for the business real property definition.
• ATO — LRBA guidance released 28 July 2026: transitional relief on exchange of a binding contract before 10 August 2026; settlement and LRBA execution may follow; refinancing of pre-ban LRBAs; business real property tested at entry and throughout the life of the LRBA; temporary vacancy while re-letting.
• ATO — “Changes to limited recourse borrowing arrangements” and “Changes to LRBAs for property from 10 August” (ato.gov.au, 2026).
• SMSF Association — media release, “ATO LRBA guidance an important first step, with further clarity needed” (2026).
• DBA Lawyers — “LRBAs will soon be limited to business real property and exclude residential property”; Sladen Legal — snippet on the passage of the ban (26 June 2026).
• Trade reporting of the 28 July 2026 guidance: SMSF Adviser, SMS Magazine and The Adviser.

Last updated: 10 August 2026 — the day the ban commenced. Act number and Schedule verified against the Federal Register of Legislation; ATO guidance points corroborated across independent professional sources.

This checker is general educational information only — it is not tax, legal or financial advice and does not consider your circumstances. Whether a specific property is business real property depends on its actual use, and the transitional rules are new. Confirm your position with a licensed SMSF adviser and the ATO before exchanging contracts or entering a borrowing arrangement.