Government to Ban New SMSF Residential Borrowing — What Self-Employed Property Investors Need to Know

The federal government has agreed to prohibit new Limited Recourse Borrowing Arrangements (LRBAs) for residential property inside self-managed super funds (SMSFs), as part of a deal with the Greens to pass its broader superannuation legislation. The change targets a strategy that has been popular with business owners and self-employed Australians who used their retirement savings to gear into residential housing.

What is changing

Under an LRBA, an SMSF borrows to buy an asset — often a residential investment property — with the lender's recourse limited to that single asset. The government's agreement would stop new residential LRBAs going forward. Existing arrangements are expected to be grandfathered, but the door to setting up fresh residential gearing through super is closing.

Who this affects most

Self-employed Australians — including many in the Chinese-Australian small-business community — have historically favoured SMSF property strategies because they offer control over retirement assets and a tax-advantaged structure. Removing residential LRBAs narrows one of the few leveraged pathways available to borrowers whose income is hard to document through conventional payslips.

The MPFG view

This policy shift is another reminder that regulatory tightening keeps pushing self-employed and small-business borrowers toward more flexible, non-bank solutions. While the SMSF residential door narrows, legitimate alternatives remain:

• Alt Doc lending for self-employed borrowers using BAS statements or an accountant's letter instead of payslips
• Commercial property finance — note the change targets residential property; commercial property in SMSFs is treated differently
• Private funding and bridging finance for investors needing short-term, asset-backed solutions

Borrowers with existing SMSF arrangements should seek licensed financial and tax advice before making any changes. For those exploring how to keep building a property portfolio outside the SMSF structure, a non-bank lender that understands self-employed income can map out compliant options.

This article is general information only and not financial, tax, or investment advice. Always consult a licensed adviser about your specific circumstances.

Source: The Adviser, 23 June 2026.