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Current SMSF LRBA rules
New real-property LRBAs are now limited to business real property.
For an LRBA entered into on or after 10 August 2026, real property must be business real property. The legislation preserves specified earlier arrangements, refinancing and acquisitions under pre-commencement arrangements.
Current LRBA position
Classify the arrangement before acting.
Earlier arrangement
An arrangement entered into before 10 August 2026 is assessed under the law applying before commencement.
Qualifying refinance
The Act preserves specified refinancing connected to a pre-commencement borrowing.
New real-property LRBA
For an arrangement entered into now, the real property must be business real property.
What applies now?
The current rule depends on the arrangement, the asset and the evidence.
New arrangements
For an LRBA entered into on or after 10 August 2026, real property must be business real property.
Earlier arrangements
An LRBA entered into before commencement remains within the earlier-law pathway.
Refinancing and acquisition exceptions
The Act also preserves specified refinancing and acquisitions under arrangements entered into before commencement.
The distinction that matters
Do not reduce every property position to “residential” or “commercial.”
The arrangement date, legal property classification and transaction history determine which pathway needs to be checked.
Arrangement date
Identify when the borrowing arrangement was entered into and retain the supporting evidence.
Property classification
For a new real-property LRBA, establish whether the asset is business real property under the relevant rules.
Refinance or acquisition history
Connect any refinance or later acquisition to the earlier arrangement before relying on an earlier-arrangement exception.
Professional confirmation
Use the recorded facts to obtain advice or legal confirmation where the fund's position is uncertain.
Historical context
The date still matters—but as the boundary between pathways.
26 June 2026
Reform enacted
The amending Act received assent.
10 August 2026
Schedule 5 commenced
The current real-property restriction and earlier-arrangement exceptions took effect.
Current position
Classify and evidence
Identify which pathway applies and keep the underlying fund record clear.
Your fund position
Start with what the fund has actually done—not a generic property label.
Existing LRBA
Keep the original arrangement, refinance history, repayments, rent, valuations, expenses and insurance connected.
Acquisition already arranged
Record the agreement and acquisition dates, settlement status and evidence supporting the earlier-arrangement position.
Considering a new LRBA
A new real-property LRBA must be assessed through the business-real-property pathway.
Direct ownership without borrowing
Direct acquisition and LRBA acquisition are different pathways and should not be grouped together.
Inside SMSF Home
Keep the LRBA position attached to the property record.
SMSF Home organises the fund record and prompts review. It does not determine legal classification or certify that an earlier-arrangement exception applies.
The arrangement date and current borrowing status
Property identity and recorded classification
Original and refinancing documents
Acquisition, settlement and ownership evidence
Repayments, rent, valuations, expenses and insurance
Trustee decisions and trustee-authorised professional review
Bring the property position home
If an LRBA forms part of the fund's property position, keep the arrangement and evidence clear.
SMSF Home Helper™ source and review record
Primary guidance sources
This educational summary is not a substitute for the current law, regulator guidance or advice based on the fund's circumstances. Use the primary sources below to check the rule and later changes.
- Treasury Laws Amendment (Tax Reform No. 1) Act 2026 - Schedule 5 (opens in a new tab)
Source checked 2026-09-01
- ATO - Limited recourse borrowing (opens in a new tab)
Source checked 2026-08-21
- SMSFR 2009/1 - Business real property (opens in a new tab)
Source checked 2026-08-21
Resource version 1.2.0 / Content reviewed 2026-09-01