SMSF Property Borrowing Banned: What Investors Need to Know

The Albanese government has struck a deal with the Greens to ban new SMSF property borrowing — here’s what it means for property investors.

The Albanese government has struck a deal with the Greens to ban new limited recourse borrowing arrangements (LRBAs) for residential property inside self-managed super funds (SMSFs), ending an investment pathway that has been available to Australian retirement savers for nearly two decades. [MPA Australia](https://www.mpamag.com/au/specialty/smsf/labor-to-ban-smsf-property-lending/579872) reports that Treasurer Jim Chalmers confirmed the change in Canberra on 23 June 2026.

The ban is prospective. If you already hold a residential property inside your SMSF via an LRBA, your arrangement is fully protected and nothing changes. A 45-day transition period will also apply for any investments currently in progress at the time the bill receives royal assent. If you are in the middle of a deal — contracts signed or a transaction underway — you have a limited window to complete it. If you were planning to use your SMSF to purchase residential property with borrowed funds in the future, that option is now closing.

What the Government Has Agreed To

Under the deal, new LRBAs by super funds for residential property will be prohibited 45 days after the relevant legislation receives royal assent. The government struck this agreement with the Greens as a condition of securing Senate support for the first tranche of its broader tax overhaul, which separately abolishes the Howard government-era 50% capital gains tax discount and replaces it with an inflation-indexed model, while also tightening negative gearing deductions for future investment purchases of existing dwellings. That broader package is now expected to pass the Senate before the end of next week.

Chalmers characterised the scale of the LRBA change as modest: “SMSFs, for example, are less than 1% of total residential property borrowing, and less than half a per cent of new residential borrowing each year,” he told reporters. He also confirmed the change would improve the budget bottom line by $50 million.

The Greens argued the ban would “take a little bit more heat out of the housing market by reducing demand,” preventing SMSF holders from outbidding renters and first-home buyers at auction. Shadow Treasurer Tim Wilson was critical of the move, describing the budget as being “in complete disarray.”

Why This Has Been a Long Time Coming

The scrutiny of LRBAs is not new. The 2014 Murray Financial System Inquiry, commissioned by the then-Coalition government, recommended tightening SMSF borrowing rules. The Council of Financial Regulators raised the same concerns in both 2019 and 2022. What makes this week’s announcement a notable policy shift is that the Albanese government had flatly rejected an identical Greens demand as recently as last year.

LRBAs have been a legitimate part of Australia’s superannuation framework since 2007, formalised further in 2011. Under these arrangements, the SMSF borrows through a separate bare trust to purchase an asset. The “limited recourse” element is a risk-management feature: if a borrower defaults, the lender can only pursue the asset held in that separate trust — not the other assets in the fund. That structure has been a key reason LRBAs have been considered relatively contained within the super system.

In practice, the ban will affect ordinary SMSF investors more than it affects wealthier ones. Without the ability to borrow, most SMSF trustees won’t have enough capital in their fund to purchase residential property outright. Wealthier investors typically have access to finance and capital outside their SMSF, meaning they are less reliant on this structure. The mum-and-dad investor who spent years building a fund balance with this strategy in mind will feel the impact most directly.

What to Do Now If You Have or Are Planning an SMSF Property Purchase

If you already have an LRBA in place for a residential property, you are grandfathered. Your existing arrangement is protected and there is no obligation to unwind it.

If you are currently mid-transaction — a contract has been signed or a deal is actively in progress — you have a 45-day window from the date the bill receives royal assent to complete the arrangement. The legislation has not yet received royal assent, so precise dates remain to be confirmed. Anyone in this position should speak with their SMSF adviser and solicitor as a matter of priority.

If you were planning to use your SMSF to buy residential property with borrowed funds, that option is now effectively closing. The strategic conversation shifts to whether you continue building a property position outside super, or redirect that capital inside super toward other asset classes. Commercial property, for example, is not covered by this ban.

It is also worth understanding how the broader negative gearing and CGT changes affect borrowing capacity for investment properties held outside super. Our [investor home loans hub](/home-loans/investor) outlines where lender policy currently stands, and our [borrowing power calculator](/calculators/borrowing-power) can help you model the impact of recent serviceability changes on your own situation.

The tax and lending environment for property investors has shifted substantially since May. Whether you are reassessing a planned SMSF purchase or reviewing how the full package of changes affects your strategy, speaking with an experienced mortgage broker alongside your financial adviser gives you the clearest picture of where you stand.