SMSF Borrowing Ban: What It Means for Your Clients’ Next Move
The SMSF borrowing ban is now in effect. As of 10 August, self-managed super funds can no longer use a limited recourse borrowing arrangement (LRBA) to buy residential property. If you’ve got clients who’ve been quietly weighing up an SMSF purchase, this is the conversation that’s now landing on your desk.
What is the SMSF borrowing ban?
The SMSF borrowing ban closes the residential LRBA pathway for new arrangements, following the federal government’s housing tax changes. It stops SMSFs from borrowing to buy residential property. But it isn’t as sweeping as the headlines suggest. A few things are worth being precise about when you’re talking to clients:
- SMSFs can still buy residential property outright using fund cash, just not with borrowed money.
- LRBAs remain available for business real property.
- Existing residential LRBAs aren’t affected, and refinancing them is still on the table.
- Anyone who had a binding contract in place before 10 August is covered by transitional arrangements, even if settlement or loan execution happens after the cut-off.
In the run-up to the deadline, brokers reported a genuine spike in activity, with clients rushing to get contracts signed in time. As Blank Financial CEO Bernard Desmond put it in a recent Broker Daily piece, the 45-day transition window created a real sense of urgency across the industry.
Does the SMSF LRBA ban affect existing loans?
No. The ban only applies to new residential LRBAs entered into from 10 August onward. Existing arrangements, and refinancing of those arrangements, are unaffected.
Where do clients go from here?
For referral partners, this is less about the ban itself and more about what your clients do next. Brokers are broadly expecting SMSF property activity to redirect rather than disappear, and the conversations tend to fall into three camps:
Clients who redirect their super elsewhere. Some will simply move that capital into other asset classes within super, stepping away from property altogether for now.
Clients who look at commercial property. Commercial property through an SMSF is still open, and some brokers expect more interest to land there. But it’s a genuinely different risk profile to residential, and not every client who could safely do residential can safely do commercial. This is worth flagging early, before a client gets too far down that path assuming it’s a like-for-like swap.
Clients who take property strategies outside super entirely. For some, this ban is the nudge to revisit their broader lending and structuring strategy, separate from their SMSF.
There’s also a wider question worth being aware of, particularly if you work with clients tied to new developments: SMSF investors have historically played a role in presale demand, and industry bodies have flagged concerns about what removing this source of capital could mean for housing supply. It’s not something that changes your advice today, but it’s useful context for the market conversations you’re having.
Can SMSFs still invest in property at all?
Yes. SMSFs can still buy residential property outright with fund cash, still use LRBAs for business real property, and still hold or refinance existing residential LRBAs. What’s off the table is new borrowing for new residential purchases.
How Can Loan Lounge Help
None of these are decisions clients should be making in a rush, and to be fair, that’s not what any of them want either. Whether a client is reconsidering their SMSF property strategy, weighing up commercial property for the first time, or just needs someone to talk through what’s actually still possible under the new SMSF borrowing ban, we’re set up to have that conversation properly and get back to you and your client quickly.
If you’ve got a client working through this right now, loop us in early. We’ll take it from there and keep you in the loop the whole way through.