LRBA ban requires immediate clarity: SMSFA

The SMSF Association (SMSFA) is urging the government to provide immediate clarity and guidance with the upcoming change on the limited recourse borrowing arrangements (LRBAs) access for self-managed superannuation funds (SMSFs).

The Australian government backed the Greens' policy to halt SMSFs from purchasing residential properties accessing LRBAs late last month. The bill subsequently passed both houses and will take effect from 10 August 2026.

Conscious of the short transitional period, the SMSFA has met with Treasury, which confirmed it is working with the ATO to develop a "rapid response" guidance on the ban, which is expected to be released "in the very near future".

The guidance will address several high priority matters, including what elements must be satisfied for an "arrangement" to be in place before 10 August 2026.

SMSFA head of policy and advocacy Tracey Scotchbrook said industry professionals, including trustees, SMSF professionals and credit providers, will need greater certainty on how key aspects of the amendments will apply.

"As the LRBA amendments came from the cross bench, there was no accompanying explanatory memorandum setting out the intent, objectives and operation of the new law. This makes the publication of this guidance vitally important," Scotchbrook said.

It comes off the back of a Parliament House roundtable hosted by shadow minister for housing and homelessness Andrew Bragg, attended by SMSFA chief executive Peter Burgess, to discuss the change.

Burgess argued at the time that the updated policy will put many SMSFs in risk of default without the means to solving the housing crisis.

"There is a strong argument that a targeted LRBA carve-out for new residential premises would align with the government's stated rationale for exempting new builds from the broader negative gearing and capital gains tax changes," Burgess said.

"The government's own housing policy distinguishes between investor demand for existing homes and investment in new homes which increases housing supply.

"We are also concerned the changes to the LRBA rules will make the remaining residential SMSF lending market even thinner, increasing settlement and refinance risk for grandfathered trustees as lenders may look to exit the residential LRBA market.

"A trustee who signs a valid off-the-plan contract before 10 August 2026 may settle 12-24 months later and still need an SMSF residential LRBA product at settlement. If lenders withdraw products or approvals lapse, the transitional protection is of little practical use.

Burgess also highlighted the industry estimates suggest SMSF buyers represent a meaningful share of off-the-plan pre-sales needed to unlock construction finance.

"Reducing this source of demand risks slowing housing supply at a time when Australia needs more homes, not fewer," he continued.

"This could delay projects, reduce the number of developments that proceed and ultimately slow the delivery of new housing.

"We also have concerns that this is not a clean residential property ban. The legislation makes future SMSF real property borrowing turn on the business real property definition in the SIS Act which is a complex technical test, never designed to operate as the gateway for all SMSF property borrowing."