The Australian Government has announced it will move to prevent SMSFs from continuing to use Limited Recourse Borrowing Arrangements (LBRAs) to invest in residential property.
The following is a Granite summary of emerging key details of this change, as well as some general information on the relevance for different types of investments and scenarios.
While Granite does not offer products for all property types and scenarios in this article, we hope this information supports you in providing relevant answers to your client questions.
Summary
- On 23 June 2026: The Australian government announced a ban on SMSFs entering new LRBAs to acquire residential property. The ban is expected to come into force 45 days after Royal Assent of the amending legislation, or around mid-August 2026.
- Legislation: The amendment, titled the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026, was tabled by Senator Nick McKim as Senate Amendment 3886, on behalf of the Australian Greens on 23 June 2026. The bill has not yet passed the Senate. The amendment will come into place via a new paragraph 67A(2)(c) in the Superannuation Industry (Supervision) Act 1993 (SIS Act).
- Property types: The proposed amendment restricts the types of assets that can be acquired under LRBAs, but specifically carves out “business real property”.
- New contracts: If contracts were exchanged before commencement of the Act, the ban does not apply even if settlement occurs after. Specifically, the text states: “even if the settlement for the acquisition of the asset happens after that commencement”.
- Off-the-plan contracts: Off-the-plan SMSF residential deals using LRBAs, where contracts have been exchanged before the Act comes into effect, would be acceptable to Granite under the current proposed legislation wording. Please note, terms and conditions apply.
- Grandfathering and refinance: Existing LRBAs are not affected. The amendment also does not apply to “maintaining or refinancing a borrowing under another arrangement entered into before commencement”, so refinancing will continue to be permitted.
SMSFs using LRBAs to invest in “business real property”
One key aspect of the changes are that LRBAs are still permitted where SMSFs are investing in “business real property”. However, this is not simply non-residential or commercial property – it is a narrower scope. Section 66 of the SIS Act defines “business real property” as including commercial, industrial and business premises used wholly and exclusively in a business.
Examples and scenarios
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Residential vs Commercial zoning
A residentially zoned property may be considered “business real property” if:
- it is genuinely used wholly and exclusively for a business, and
- the property itself is being used in a business (not just generating income).
SMSFs would need to consider this definition of “business real property”. For example:
- Airbnb: Airbnb would typically not be considered business real property because the property is being used as residential accommodation and the “business” component of renting would likely be characterised as letting/licensing occupancy for residential purposes. Likewise for short-stay accommodations, holiday letting.
- Serviced apartments: Serviced apartments are less clear. Even though they are typically more commercialised than Airbnb arrangements, they are still providing accommodation (a residential purpose). Iit should not be assumed they are a business real property unless they are clearly a hotel-style business.
- Residential property used as an office: Residential property used as an office would be permitted. Residential properties used as an office need to be genuinely used 100% as a business premises, for example to run a law firm, a dental practice, or a retail/office. No residential occupation is permitted, and no mixed use is permitted.
- Primary production: may be considered business, but a dwelling used as a primary residence on a hobby-farm/lifestyle acreage would likely not be considered business real property. (Not offered by Granite).
Conclusion
- There is still the potential for changes to the proposed wording of the amendment, which has not been enacted.
- One thing to note is that ministerial discretion is not included – which means that if enacted, no future minister can reverse the restriction through regulations.
- Going forward SMSFs should obtain specific advice to ensure the property they are acquiring meets the definition of “business real property” and ensure that they obtain pre-approval from their lender before entering into any purchase contracts.
Disclaimer
This is general information only and does not constitute financial or legal advice. Brokers and clients should speak to qualified SMSF specialists before making any decisions.
