Property, Super & Perspective

The Ban That the Budget Itself Set Up

If you’d been told a year ago that borrowing to buy residential property inside an SMSF would be banned, you’d have assumed it was a considered piece of retirement policy. It wasn’t. It was the price of a deal.

On 26 June 2026, the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent. From 10 August 2026, SMSFs can no longer use a limited recourse borrowing arrangement (LRBA) to acquire residential property. The mechanics are narrow but the story underneath is the interesting part.

Here’s the sequence worth noticing. The Budget replaced the 50% CGT discount and curbed negative gearing for property held outside super — but left super’s concessional tax settings untouched. Overnight, that made SMSFs the last genuinely tax-advantaged way to hold geared residential property, and the spruikers noticed. Social media filled with pitches to “turn your super into a property portfolio.” The Greens then extracted the LRBA ban as the price of their Senate votes for the very same tax package.

In other words: the Budget created the incentive, and the Budget’s own passage created the ban to close it.

A few things worth understanding:

• It’s a definition, not a category. The ban applies to any real property that isn’t business real property — so a mixed-use shop-with-a-flat can quietly fail the test, while a genuine commercial premises is untouched.
• Existing arrangements are safe. Current LRBAs are grandfathered, contracts exchanged before 10 August are protected, and refinancing is permitted (though the ATO hasn’t finalised when a refinance becomes a “new” arrangement).
• The numbers don’t match the noise. For all the “turn your super into a property portfolio” hype, SMSF borrowing is still under 1% of residential lending, and the ban raises only about $50 million. In other words, the Government moved to shut down a rush that had barely begun — which makes the speed and manner of the change all the more striking.