Parliament voted on 25 June 2026. If you have been thinking about buying a residential investment property inside your self-managed super fund using borrowed money, the window to do that is almost closed. This post sets out what the legislation does, what it leaves alone, and the questions worth working through with the right advisers.
What just passed
The bill passed both houses of Parliament on 25 June 2026. The Senate passed it by 35 votes to 25, and the House of Representatives agreed to the Senate amendments later that day by 98 votes to 39.
The operative amendment was tabled by Senator Nick McKim on behalf of the Australian Greens. It inserts a new paragraph into subsection 67A(2) of the Superannuation Industry (Supervision) Act 1993, which sets out the conditions an LRBA must meet to be permitted.
In plain terms: the ability to borrow inside an SMSF for residential property is gone for new arrangements. The strategy has existed since 2007. These changes represent the most significant restriction on self-managed super fund borrowing since the LRBA exception was introduced.
The three things that did not change
Before getting to the consequences, it is worth being clear on what the legislation does not touch.
Existing residential LRBAs are grandfathered. Existing arrangements entered into before commencement will be grandfathered, as would refinancing arrangements that maintain or refinance pre-commencement borrowings. Acquisitions entered into before commencement will also be protected, even where settlement occurs after commencement. That said, if your SMSF has an existing residential LRBA and you are considering refinancing, do not proceed without specific legal advice. Whether a refinance is treated as a 'new' LRBA is not yet settled by the ATO.
Commercial property LRBAs are unaffected. Real property that constitutes business real property will still be able to be acquired using an LRBA. If you run a business and were planning to use your SMSF to purchase your commercial premises via an LRBA, this strategy is completely unaffected.
Tax settings inside super are unchanged. Tax rates inside super are also unchanged. Income is taxed at 15 per cent during accumulation and at zero per cent once a fund is in pension phase. Super funds continue to receive a concessional tax on gains, including an effective 10 per cent rate on realised gains and a zero rate for retirees once the fund is in pension phase.
The transition window
The legislation is not yet fully in force. As of 26 June 2026, the bill has passed both houses and is awaiting Royal Assent from the Governor-General. The 45-day contract window opens once Royal Assent is granted, expected by early July 2026, putting the commencement date around 12-16 August 2026.
You may be affected if you are currently mid-process on a residential LRBA. The legislation is explicit: if you enter into an acquisition arrangement, meaning you exchange contracts, before commencement, you are protected, even if settlement happens after the ban takes effect.
The 45-day window is for finishing, not starting. It exists to let trustees already mid-process complete settlement. It is not extra time to begin a new purchase.
What this looks like in practice
Consider two scenarios, for illustration only, not as projections of any return or outcome.
Scenario A: Existing LRBA. An SMSF established an LRBA for a Brisbane unit in 2023. The fund holds the property in a bare trust. Under the new rules, that arrangement continues on exactly the same terms. Rental income is taxed at 15 per cent in accumulation phase, or at zero per cent if the fund has fully moved into pension phase under the Transfer Balance Cap. The general transfer balance cap is $2 million for 2025-26, rising to $2.1 million from 1 July 2026. The fund does not need to sell or restructure anything.
Scenario B: Planned new LRBA. A trustee with $320,000 in their SMSF was planning to borrow to purchase a Melbourne townhouse. That specific pathway closes when the ban commences around mid-August 2026. Alternatives worth discussing with an SMSF specialist accountant include buying commercial property via LRBA, buying residential property inside the SMSF outright if the fund balance allows, or holding investment property outside super entirely.
One further development worth knowing: Division 296, a new tax on super earnings above $3 million in total super balance, was enacted in March 2026. It applies from 1 July 2026, with the 2026-27 financial year being the first affected year. This sits separately from the LRBA ban but affects the overall picture for larger SMSF balances.
Three things to do now
- If you have an existing residential LRBA: Confirm with your SMSF specialist accountant that your arrangement is correctly documented and sits within the grandfathering provisions. Do not refinance without getting written advice on whether that constitutes a new arrangement under the SIS Act. The ATO has not yet issued guidance on this point.
- If you were planning a new residential LRBA and have not signed a contract: Move quickly if the strategy genuinely suits your position. Contract exchange before the commencement date is the protection trigger. Speak with a licensed broker experienced in SMSF lending and an SMSF specialist accountant before acting. You can start a conversation with our team at elitewealthcreators.com/booking/.
- If you are weighing property inside versus outside super: The broader tax landscape has also shifted. The government has abolished the 50% CGT discount for new investment properties outside super, replacing it with a system that taxes only the inflation-adjusted real gain. Superannuation, including SMSFs, was deliberately excluded from the CGT changes and keeps its existing concessional treatment. A licensed financial adviser can help you weigh the two structures against your personal position. Our services page outlines how EWC sources and coordinates property and finance for investors working through exactly these decisions.
General information only, not personal financial advice. Speak with a licensed adviser before acting.