SMSF Residential Borrowing Banned: What the 45-Day Window Means

The federal government has banned new SMSF limited recourse borrowing for residential property, leaving a 45-day transition window after royal assent.

The federal government has moved to ban self-managed super funds from using limited recourse borrowing arrangements (LRBAs) to purchase residential property — a measure secured as a condition of the Australian Greens supporting Labor's capital gains tax and negative gearing overhaul in the Senate.

The ban, confirmed this week, has drawn immediate criticism from the broking industry, peak bodies, and investor advocates. Most argue the change targets a small and well-regulated corner of the market while doing little to improve housing affordability for the Australians it claims to help.

For SMSF trustees who have been weighing a residential property purchase, the clock is now ticking. Here is what the ban means, what the transition window allows, and what your realistic options are.

What changes and when: the 45-day window explained

Under a limited recourse borrowing arrangement, an SMSF uses its existing balance to fund a deposit — typically 20–30 per cent — along with associated costs such as stamp duty and legal fees. The purchased property is held in a separate bare trust until the loan is fully repaid, at which point ownership transfers to the fund. Crucially, the lender's recourse is limited to the asset in the bare trust, which means the rest of the fund's assets remain protected.

The major banks — the Commonwealth Bank, ANZ, NAB, and Westpac — largely exited the LRBA market between 2015 and 2018. However, as The Adviser reports, a substantial group of specialist and non-bank lenders including La Trobe Financial, Liberty Financial, AMP, Bluestone, Pepper Money, Resimac, RedZed, and Mortgage Ezy have continued to write LRBA business. Those lenders will no longer be able to write new SMSF residential loans once the ban takes effect.

According to Australian Taxation Office data cited by The Adviser, SMSFs currently hold approximately $75 billion in assets financed through LRBAs, underpinned by around $28.9 billion in debt — a gearing level of close to 40 per cent.

The ban applies to loans entered into 45 days after the Budget legislation receives royal assent. The Budget bill is expected to clear the Senate before parliament rises on 2 July, which places the effective cut-off date in mid-August 2026. All existing LRBA loans remain intact, and contracts signed before the ban commences — including transactions currently in progress — are protected.

Why the broking industry says the ban misses the mark

The Mortgage & Finance Association of Australia, the Commercial & Asset Finance Brokers Association of Australia, and the Australian Finance Industry Association have jointly condemned the ban.

MFAA executive of policy Naveen Ahluwalia said the effects were already visible in broker conversations. "Mortgage and finance brokers are hearing from investors who are delaying decisions, reassessing future investments and, in some cases, stepping away from the market altogether," he said. He argued that SMSFs have played an important role in funding rental housing and new developments, and that restricting their access to debt "risks becoming another disincentive for Australians willing to invest in residential property" at a time of housing shortages and rental pressure.

Property Investment Professionals of Australia chair Cate Bakos said the ban would land hardest on investors who had been using LRBAs to access property within super when their personal borrowing capacity was already stretched. She pushed back on any suggestion the market had been loosely regulated: "Since limited recourse lending was introduced in 2008, lending for property within SMSFs has always been far tighter and more restrictive than borrowing in personal names. It required lawyer input and a signed off strategy from a qualified AFSL representative." She also noted that SMSF residential borrowing represents approximately 1 per cent of the overall residential market — a proportion that raises questions about the proportionality of the measure.

Broker Matt Turner, partner and managing broker at GSC Finance, framed the change as deepening an already significant divide between those who already hold leveraged SMSF property and those who now cannot. "It is creating a wealth divide that is larger than ever. Those who had the opportunity will benefit massively from these changes as they were able to purchase with debt, whereas someone that hasn't will not have that same opportunity," he said.

Acting before the deadline — and what not to do

If you are an SMSF trustee who has been seriously considering a residential purchase through an LRBA, the 45-day window after royal assent is real — but it is narrow and requires that you already have a property target and a finance pre-approval close to ready.

Tom Newman of Perth-based Venture Finance, whose phone has been running hot since the announcement, urged discipline over panic. "Don't just jump into something because you think it's going to end and you might not be able to get in. That could be worse than missing out," he said. "Apply the same metrics you've always applied to look for property. If it's a good deal, by all means execute on it. If it's a bad deal and you're coming up to the deadline and you miss out, then so be it."

Property searches typically take four to six weeks once a pre-approval is in hand. An LRBA adds another layer of complexity — a bare trust structure, legal documentation, and lender-specific SMSF requirements — on top of a standard residential purchase. Anyone hoping to transact before mid-August needs to have started that process already, or must be realistic about what the timeline allows.

For SMSF investors who cannot move in time, direct property ownership in a personal name or through a trust structure remains available, though the tax treatment and leverage implications differ materially from an SMSF approach. The complexity of those alternatives means independent financial and legal advice is essential before changing direction.

If you want to understand your current options as a property investor outside an SMSF structure, the [investor home loans](/home-loans/investor) hub compares what lenders are currently offering. The [borrowing power calculator](/calculators/borrowing-power) can help you estimate what is available to you in your personal capacity, separately from any super fund structure.

[Read The Adviser's full report on the industry reaction here.](https://www.theadviser.com.au/broker/48589-broking-industry-lashes-smsf-property-borrowing-ban)