The End of SMSF Property Borrowing: What the Greens Deal Means for You

In a deal struck today to get Labor's broader tax package through the Senate, the Greens have extracted a significant concession: Limited Recourse Borrowing Arrangements (LRBAs) for residential property inside SMSFs are being abolished. If you've been thinking about using your super to borrow and buy an investment property, the window is now firmly closing.

Here's what's actually happening, what's protected, and what you should be doing about it.

What Just Happened?

The Greens agreed to support the government's first tranche of tax changes - including the negative gearing and CGT indexation reforms - on the condition that Labor agreed to close what the Greens have long described as the 'SMSF property loophole.'

SMSFs have been able to borrow to buy property through LRBAs since 2007. Under normal super law, funds aren't permitted to borrow; LRBAs were a deliberate carve-out. That carve-out is now being removed for residential property.

The Greens also secured a second concession: the Treasurer's power to later expand what assets can qualify for the 50% CGT discount; or what property types can be used to offset salary and wages; has been removed. In other words, a future government can't just pen in a ministerial determination to undo these changes quietly.

What Are the Key Details?

What About the Broader Tax Package?

This LRBA change was the Greens' price for supporting the broader bill. The rest of the package - as announced in the May Budget - is now confirmed as law:

Important: Superannuation funds (including SMSFs) remain exempt from the negative gearing changes and CGT minimum tax. The LRBA abolition is separate - it's a structural change to what SMSFs can do, not a tax rate change.

What Does This Mean for SMSF Property Investors?

If You Already Have an LRBA

You're protected. The change is explicitly prospective - existing arrangements are not affected. Your fund can continue making repayments, holding the property, and eventually selling it under the same rules as today. No action required on the borrowing structure itself, though the CGT and negative gearing changes from the broader package still apply based on when your fund purchased the property.

If You Have a Contract Signed Before Commencement

Also protected. If you've exchanged contracts on a residential property under LRBA before the law takes effect, you're grandfathered. If you're in the middle of a deal - finance not yet formal, or contract not yet exchanged - you need to move urgently or reassess. Get in touch.

If You Were Planning an LRBA

That path is now closed for residential property. The question becomes: does the underlying investment thesis still work outside of super? Or is the strategy best reconsidered entirely?

Here's the thing most people miss - LRBAs were always a blunt tool. The interest rates are typically higher than retail loans, establishment costs are significant, and the compliance overhead is real. For many clients the better structure was already personal name or a trust, with the super kept clean for passive compounding. The abolition actually forces a conversation that should have happened anyway.

What Should You Do Now?

For everyone else, the message is: don't panic. Existing LRBAs are safe. Your super fund's property investments aren't going anywhere. But this is a good prompt to review whether your overall strategy - inside and outside super - is still optimally structured given everything that's changed in the last six weeks.

The Bigger Picture

The housing policy environment has shifted more dramatically in the last 45 days than in the previous decade. We now have: negative gearing grandfathered but abolished for new established property purchases, CGT indexation returning in place of the 50% discount, LRBA property borrowing in SMSFs abolished going forward, and discretionary trust distributions facing a 30% minimum tax floor from 2027.

None of these changes are cause for alarm if your structure was sound to begin with. But if your strategy was built around any of these tools - particularly an LRBA you hadn't yet pulled the trigger on - the calculus has changed, and we need to talk.