Just announced · 23 June 2026 · proposed, not yet law
Investor Finance
SMSF borrowing for residential property: what the proposed ban means
On 23 June 2026 the government agreed to stop SMSFs borrowing to buy homes. Here is what changes, what does not, and what it means... in plain English.
On 23 June 2026, the government agreed to a Greens amendment that would stop self-managed super funds (SMSFs) from taking out new loans to buy residential property. It was the trade for Greens support of the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026... the same Bill changing negative gearing and the CGT discount, which I covered in the 2026 budget post.
Announced
23 June 2026
The government agreed to a Greens amendment banning new SMSF loans for residential property, in exchange for Senate support of the Tax Reform No. 1 Bill.
Proposed start
45 days after the law passes
Industry coverage points to the ban starting 45 days after the Bill receives royal assent. The Bill has not passed yet, so there is no confirmed start date.
The three things to know
What stops
New residential loans
SMSFs could no longer borrow to buy a home or unit once the rules take effect.
Read moreRead
What continues
Commercial property
Borrowing to buy eligible business premises is not affected.
Read moreRead
What is protected
Existing loans
Arrangements already in place would be grandfathered and carry on as normal.
Read moreRead
01What is actually changing
SMSFs have been able to borrow to buy property since 2007, through a structure called a limited recourse borrowing arrangement, or LRBA (the current rules took shape in 2010). In an LRBA, the fund borrows to buy a single asset that is held in a separate trust until the loan is repaid. If things go wrong, the lender can claim only that one asset, not the rest of the fund.
The proposed change closes that door for residential property. Once it takes effect, an SMSF could no longer enter a new LRBA to buy a home or unit. It does not unwind anything already in place, and it does not touch commercial property.
Who this affects
New residential loan
After the rules take effect
New residential loan
After the rules take effect
Blocked. An SMSF could no longer borrow to buy residential property.
Existing SMSF loan
Already in place
Existing SMSF loan
Already in place
Protected. Arrangements already set up continue under the current rules. The change applies going forward only.
Commercial property
Business real property
Commercial property
Business real property
Unaffected. An SMSF could still borrow to buy eligible business premises.
02What is not changing
- Existing SMSF property loans. If your fund already holds a property under an LRBA, this does not change it. Existing arrangements are grandfathered.
- Commercial property borrowing. The change applies to residential property only. Borrowing to buy business premises is not affected.
- SMSFs themselves. SMSFs are not being banned or wound back. This is about one thing: new borrowing to buy residential property inside the fund.
03Why the government says it is doing this
The reason given is protecting retirement savings. Borrowing to invest inside super magnifies both the gains and the losses, and several reviews have flagged the risk. The 2014 Murray Financial System Inquiry went further and recommended removing the borrowing exception altogether. The government of the day did not adopt that recommendation... this amendment revisits it, for residential property only.
The government also points out that SMSF borrowing is a small part of the market... less than 1% of all residential property borrowing, and under half a per cent of new borrowing each year. The measure is expected to improve the budget by around $50 million over the forward estimates. It is framed as a risk measure, not a housing-affordability one.
What it means if you were looking at an SMSF purchase
If you were part-way through setting up an SMSF purchase, the timing matters, and the detail is still subject to the final legislation. Industry coverage points to a short window for arrangements already in train, but the exact mechanics sit with the law as it passes. This is the moment to talk to your SMSF specialist and accountant rather than act on a headline. I am not going to tell you to rush a decision about your super... that is the opposite of how this should be approached.
If your plans were outside super all along, none of this affects you. And if commercial property is on your radar, that pathway is unchanged.
Common questions
Is SMSF borrowing to buy property being banned?
A ban on SMSFs taking out new loans (LRBAs) to buy residential property was announced on 23 June 2026 as part of a Labor-Greens deal. It applies to residential property only, and it is not law yet... it is a proposed amendment to a Bill still before the Senate.
Are existing SMSF property loans affected?
No. The change applies going forward only. Existing SMSF loans would be grandfathered and continue under the current rules. It is about new borrowing, not loans already in place.
Can an SMSF still borrow to buy commercial property?
Based on what was announced, yes. The ban applies to residential property. Borrowing to buy business real property... commercial premises used in a business... is not affected. This is subject to the final legislation.
When would the SMSF residential borrowing ban start?
Industry coverage points to the ban starting 45 days after the Bill receives royal assent. The Bill has not passed yet, so there is no confirmed start date, and the detail may change before it becomes law.
Why is the government banning SMSF residential borrowing?
The stated reason is reducing risk to retirement savings, since borrowing inside super magnifies losses as well as gains. The 2014 Murray Financial System Inquiry recommended removing the borrowing exception, and this amendment revisits that for residential property. The government also notes SMSF borrowing is a small share of the market.
How long have SMSFs been able to borrow to buy property?
Since 2007, when limited recourse borrowing was first allowed under super law. The current LRBA framework took shape in 2010. The proposed change would end that option for new residential purchases, while leaving commercial property borrowing in place.
I am mid-purchase in my SMSF. What happens?
That depends on the timing relative to when the law passes and any transition window, and the detail is still subject to the final legislation. This is a question for your SMSF specialist and accountant, who can look at your specific arrangement. I would not make a call on super timing from a headline.
Sources
- Prime Minister of Australia... Government another step closer to delivering tax reforms (23 June 2026) ... primary source: confirms the residential LRBA ban, that existing arrangements are unaffected, the Murray Inquiry rationale, and the under-1% / under-0.5% figures.
- Parliament of Australia... Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 ... Bills Digest ... Bill status and passage.
- The Adviser... Government agrees to ban future LRBA for resi ... reports the 45-day commencement and ~$50m budget impact.
- Accountants Daily... Labor strikes deal with Greens to enable passage of tax changes ... the deal and prospective application.
- Note: this reflects the position announced 23 June 2026 and is subject to the final form of the legislation. The 45-day start and $50m figure come from industry coverage, not the official media release. It is not yet law.
