We outline below the press releases in which both parties reached agreement on changes to the LRBA rules, and discuss the amendment moved by Senator Nick McKim of the Greens to the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 (Bill), tabled in Parliament on 28 May 2026, relating to, among other things, the negative gearing and CGT changes (the first tranche of tax changes).
What did the recent announcements say?
The Greens’ press release on 23 June 2026 states that the Government has agreed to:
Close self-managed superannuation fund’s exemption from the prohibition on being able to borrow to fund investments.’
The media release issued by the Prime Minister (PM) on 23 June 2026 is narrower, as it states that the Government will support an amendment:
… to ban future … (LRBAs) for residential property by superannuation funds.
The Greens’ amendment to the Bill
Senator Nick McKim of the Greens has moved an amendment to the definition of ‘acquirable asset’ in s 67A(2) of the Superannuation Industry (Supervision) Act 1993 (Cth) (SISA). This amendment provides that, where an asset is real property, it must be business real property within the meaning of s 66 of the SISA (see below). Simply put, this excludes any real property that is not business real property from being an acquirable asset for SMSFs.
Importantly, this change does not preclude an SMSF undertaking an LRBAs in respect of other acquirable assets such as shares in a company or units in a unit trust subject to the usual tests.
What is business real property?
Business real property is defined in s 66 of the SISA as the following:
- any freehold or leasehold interest of the entity in real property; or
- any interest of the entity in Crown land, other than a leasehold interest, being an interest that is capable of assignment or transfer; or
- if another class of interest in relation to real property is prescribed by the regulations for the purposes of this paragraph – any interest belonging to that class that is held by the entity;
where the real property is used wholly and exclusively in one or more businesses (whether carried on by the entity or not), but does not include any interest held in the capacity of beneficiary of a trust estate.
For example, a residential property that is used wholly and exclusively in one or more businesses will still be an acquirable asset under s 67A(2) following the amendment. However, a building which has an office and an apartment above, and is therefore partially used for residential purposes, will not be an acquirable asset.
What is an arrangement?
The amendment applies in relation to arrangements entered into on or after the commencement of the amendments, the important question is what will constitute an ‘arrangement’.
There are a number of possible events that might be considered essential to the commencement of an LRBA including:
- The approval of finance.
- The signing of a loan contract with the lender.
- The drawdown of a loan.
- The signing of the contract of sale to purchase a property.
- The payment of the deposit.
- The execution of the bare trust deed and related documents.
- The settlement of the property.
Understandably, the lack of any guidance setting out what constitutes an arrangement means it is not clear at this stage what circumstances will constitute an ‘arrangement’. Expert advice should therefore be obtained.
When will the changes commence?
The commencement date is similarly unclear.
The amendment expressly states that the change will be prospective, will protect contracts signed before commencement and will take effect 45 days after royal assent. The announcement was also made in the context of the Greens indicating support for the passage of the first tranche of tax changes to pass the Senate during the current Parliamentary sitting fortnight, which ends on 2 July for both houses.
Given the agreement between the Government and the Greens, the amendment is likely to be passed by 2 July 2026. This would result in the amendments possibly taking effect around mid-August 2026.
Transitional aspects
The amendment is intended to apply in relation to arrangements entered into on or after 45 days after the commencement of the Bill under which money is borrowed, or borrowings of money are maintained, for the acquisition of assets under LRBAs.
An LRBA entered into before the change may need to be refinanced after the change and the amendment is designed to provide this flexibility. However, there are a number of rules that still need to be covered for an existing LRBA to be grandfathered and expert advice should be obtained.
Where to from here?
If residential property borrowing by SMSFs is being targeted because of perceived housing market impacts, it remains unclear why LRBAs will not be permitted for newly constructed housing to increase the potential supply of residential accommodation.
In particular, the Government is allowing negative gearing and the 50% CGT discount on new acquisitions of residential dwellings acquired by individuals (outside SMSFs) after its 12 May 2026 Budget. However, these two tax changes apply to established residential dwellings acquired after 7.30pm on 12 May 2026, as reflected in Schedule 2 of the Bill.
There are a number of reasons why SMSFs should be allowed to continue to borrow to invest in new residential dwellings if the Government is keen on increasing the supply of housing in Australia.
There are a number of tax concessions granted for large Build to Rent (BTR) developers to increase housing in Australia including:
- an accelerated deduction of 4% for capital works relating to BTR developments; and
- a concessional final withholding tax rate of 15% on eligible fund payments.
- Some states and territories also offer tax incentives to BTR developers (eg, in Victoria, where land tax is calculated at the reduced rate of 50% of the taxable value of the land).
The PM states in its press release of 23 June 2026:
These [LRBA] arrangements constitute less than 1 per cent of total residential property borrowing and less than half a per cent of new residential borrowing each year.
Thus, providing the ability for SMSFs to continue to undertake LRBAs for new residential property is consistent with Government policy and would add to the supply of housing in Australia.
Lack of consultation and transition
As of March 2026, there were now 672,805 SMSFs and 1,239,977 members with total estimated assets of $1.06 trillion.[1] The above ‘agreement’ was undertaken without any consultation with this important SMSF sector that accounts for around 25% of Australia’s total retirement savings. Moreover, the SMSF Association has labelled this change as a case of political ‘deal making’.
Conclusions
Moving forward, until the amendment is finalised as law, we recommend that expert advice be obtained before proceeding with new or refinanced LRBA arrangements to make sure they satisfy the proposed changes.
[1] https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf/smsf-newsroom/highlights-smsf-quarterly-statistical-report-march-2026
