The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 has been amended in the Senate, and then passed by the House of Representatives, to include the recent Greens measure to ban SMSFs from using limited recourse borrowing arrangements (LRBAs) to buy “residential property”.
They include that section 67A of the Superannuation Industry (Supervision) Act 1993 will be amended to include the following restriction “for an asset that is real property—the asset is business real property (within the meaning of section 66 of this Act).”
That is SMSFs won’t be banned from using LRBAs to buy residential property but rather any LRBAs over real property must be for the acquisition of “business real property”.
The use of business real property has a couple of interesting outcomes.
First, business real property can include residential property. Examples include:
A residential property used for business purposes – eg a doctor’s clinic
Residential properties used as stock in a residential rental business
Residential land held as trading stock in a property development business
Second it will exclude LRBAs over some “non-residential property”. Examples include:
Vacant commercial land not used in a business
Commercial land which has some personal use
Mixed use properties with some residential use
Farm land not used in a business
Third, the grandfathering of existing arrangements. The measure will not apply to arrangements “entered into before” the commencement of the measure.. The note in the Bill states that this is exclude from the new laws “a borrowing arrangement for which the related asset is acquired under an arrangement entered into before that commencement (even if the settlement for the acquisition of the asset happens after that commencement).”
This suggests the measure will not apply to any contracts signed before the commencement of the new law - ie 45 days after the Bill receives royal assent, even if settlement is after that date.
Phil Broderick
Principal
T +61 3 9611 0163 l M +61 419 512 801
E pbroderick@sladen.com.au
This article was originally published on the Sladen Legal website: Sladen snippet - legislation passed with ban on LRBAs for “residential property”
