The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 passed both houses of Parliament on 25 June 2026 and received Royal Assent on 26 June 2026 as Act No. 49 of 2026. The ban on new SMSF limited recourse borrowing arrangements (LRBAs) for residential property is now law. It commences on 10 August 2026, exactly 45 days after Assent.
We covered the announced amendment in detail when the government and Greens announced their Senate deal on 23 June. With passage and assent now locked in, and with the as-made Act in hand, the open questions from that piece have answers.
What we now know
The mechanism. The amendment, moved by Greens Senator Nick McKim and contained in Schedule 5 of the Act, adds a new paragraph (c) to subsection 67A(2) of the SIS Act 1993. The new paragraph reads: “for an asset that is real property—the asset is business real property (within the meaning of section 66 of this Act).” The effect is that where the asset acquired under an LRBA is real property, it must be business real property. This excludes residential property from the assets an SMSF can acquire under an LRBA. Of the three drafting mechanisms we flagged in the earlier article, the one that landed was an amendment to the “single acquirable asset” test rather than a wholesale repeal of ss 67A and 67B.
Refinancing is permitted. This was the single biggest open question from our earlier piece. The answer is yes, and the carve-out sits in the transitional provisions rather than on the face of s 67A. Schedule 5, Item 2(2)(a) of the Act provides that the new prohibition does not apply to an arrangement that is “for maintaining (or refinancing) a borrowing of money under another arrangement entered into before that commencement.” The accompanying note to Item 2 confirms that a refinancing arrangement on those terms continues to be covered by the existing s 67A(1) exception. Trustees with an existing residential LRBA can refinance to maintain or replace that pre-commencement borrowing. The scope of the refinancing carve-out, particularly where a refinance involves increasing the loan balance, changing the secured property, or restructuring the bare trust, may require further ATO clarification at the margins.
Contracts entered into before commencement remain protected, even if settlement is later. Schedule 5, Item 2(2)(b) of the Act preserves any LRBA where “the acquisition of the asset (to which the borrowing under the arrangement relates) happens under an arrangement entered into before that commencement (even if the settlement for the acquisition of the asset happens after that commencement).” A residential property contract signed on 9 August 2026 that settles in November remains a valid LRBA acquisition. For the borrowing arrangement itself, practitioner commentary is broadly aligned that contract signing is the trigger event, but DBA Lawyers has noted that the legal threshold for what constitutes an “arrangement” (potentially including finance approval, deposit payment, or execution of the bare trust) may need ATO clarification at the margins.
No new build / established distinction. The ban applies to all residential property without distinction between new builds and established property. The Act does not include a defined term “residential property” for these purposes. The test operates via the negative space of the business real property definition in s 66 of the SIS Act: anything that does not qualify as BRP under s 66 fails the new s 67A(2)(c) condition where the asset is real property. This sits differently from the negative gearing changes in the same Act, which quarantine deductions on established residential properties (those purchased after 7:30pm AEST on 12 May 2026) from the 2027-28 income year onwards while retaining negative gearing for new builds. For SMSF LRBA purposes, new and established residential properties are treated identically: both excluded from 10 August.
BRP edge cases. The use-based test in s 66(5) means a residential dwelling used wholly and exclusively in one or more businesses can still qualify as business real property, and so as an acquirable asset under an LRBA. Mixed-use properties, for example a shop with a residential flat above, generally will not qualify, because the “wholly and exclusively” test in the BRP definition has only narrow exceptions. With the new s 67A(2)(c) gateway being a BRP test, the s 66 definition and SMSFR 2009/1 become the critical reference points for any trustee considering an LRBA acquisition involving real property.
What’s still open
The ATO has not yet issued transitional guidance. The SIS Regulations have not been amended in consequence by the Act itself (the Act amends the SIS Act only) and any consequential amendments would come through a separate legislative instrument; none has yet been registered. We will refresh this article as both arrive.
What this means for trustees
If you have an existing residential LRBA in your SMSF. Nothing changes for you. Your loan, your bare trust, and your fund continue under the existing rules. Refinancing is preserved per Schedule 5, Item 2(2)(a).
If you have a contract entered into by 9 August 2026 for a residential property acquisition under an LRBA. You are protected per Schedule 5, Item 2(2)(b). The transition runs on whether the acquisition arrangement is entered into before 10 August; settlement can fall after.
If you are mid-process on a new residential LRBA without a signed contract. Your window closes on 9 August 2026. Talk to your accountant, your lender, and your adviser this week if you have not already.
If you wanted to use an LRBA to buy commercial property or business real property. No change. The new s 67A(2)(c) condition is real-property-must-be-BRP, so BRP and other non-residential acquirable assets remain available.
Need clarity on your specific arrangement before 10 August? Book a 15-minute call and we will run through where you sit. No pressure, just a clear read on whether you are inside the transition window or outside it.
Book a readiness call →Sources: Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Act No. 49, 2026, C2026A00049, Federal Register of Legislation; Royal Assent 26 June 2026), Schedule 5 — Limited recourse borrowing arrangements; SIS Act 1993 ss 67A(2), 66; SMSFR 2009/1 (business real property); Senate amendment 3886 (McKim, Greens); Explanatory Memorandum to the Bill (and supplementary EM addressing the McKim amendment); Prime Minister, Treasurer, and Minister for Finance media release, 23 June 2026; Australian Greens media release, 23 June 2026; SMSF Association update on LRBA amendment, June 2026; Institute of Financial Professionals Australia, 26 June 2026 update; Heffron technical commentary on the LRBA amendment (heffron.com.au); SMSF Adviser coverage (smsfadviser.com), including the DBA Lawyers technical piece on the “arrangement entered into” question.
