The 10 August SMSF borrowing change: what it stops, and the three things it doesn't touch

On Monday 10 August 2026, the rules for borrowing inside an SMSF narrow. From that day, a new limited recourse borrowing arrangement can only be used to acquire real property that is business real property. A new LRBA over a residential rental stops being available.

There is a lot of alarmed commentary circulating about this date, and some of it stretches the provision well past what the Act says. So here is the change as enacted, dated and cited from the legislation itself, followed by the three situations the provision does not reach.

Where the date comes from

The change is Schedule 5 of the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which received royal assent on Friday 26 June 2026. The Act's own commencement table (s 2, table item 7) starts Schedule 5 on "the 45th day after this Act receives the Royal Assent". Count 45 days from 26 June and you land on Monday 10 August 2026.

What actually changes

Section 67A of the SIS Act is the exception that lets a fund borrow at all: the arrangement must be limited recourse, over a single acquirable asset, held on trust until the loan is repaid. Schedule 5 item 1 adds one more condition to that list: if the asset is real property, it must be business real property within the meaning of s 66.

Business real property is, in broad terms, property used wholly and exclusively in one or more businesses. A shop, a warehouse, a medical suite, a farm can qualify. A residential rental ordinarily does not.

So from 10 August, the borrowing exception no longer covers a new residential purchase. That is the whole change. It is a real narrowing, and for a fund that was planning a geared residential purchase it matters. But the provision lives entirely inside s 67A, and that placement is what limits it.

The three things it does not touch

1. Contracts already exchanged. Schedule 5 item 2 protects an acquisition that happens under an arrangement entered into before commencement, and the Act's note spells out that the protection holds "even if the settlement... happens after that commencement". A residential contract exchanged under an LRBA before 10 August completes on its original terms, whatever the settlement date.

2. Refinancing an existing borrowing. Item 2 also preserves a borrowing that refinances a pre-commencement borrowing. An existing residential LRBA can be refinanced after 10 August without engaging the new condition. Funds carrying an older loan do not lose access to refinance because the calendar turned.

3. Buying without borrowing. Section 67A only governs borrowed acquisitions. A fund that buys property outright with its own cash never enters s 67A, so the new condition never applies to it. There is no 10 August deadline on cash purchases, despite a fair amount of commentary implying otherwise.

What this means in practice

If your fund holds residential property today, whether geared or not, nothing about 10 August requires you to sell, restructure, or act by a date. The provision is prospective and reaches only new borrowing arrangements.

What the change does do is raise the record-keeping stakes around the arrangements that remain. An LRBA that continues past 10 August sits in a category the law has just tightened, which is exactly the kind of thing an auditor reads carefully: when the arrangement was entered into, what it covers, and whether a later refinance stays within the preserved scope. The date the arrangement was entered into is now a fact worth being able to prove, not just remember.

That is a documents problem, and it is solvable in an afternoon: the loan agreement, the contract exchange date, the bare trust deed, and the settlement record, filed where they can be produced. Funds that hold property also carry the standing annual obligations that have nothing to do with this change: an objective market valuation at 30 June with evidence behind it, rent received on lease terms, and expenses split correctly between deductible repairs and capital improvements.

We build record-keeping software for SMSF trustees, and property-fund records are where we are heading next. If you run your own fund, you can see how the current product keeps audit evidence ready at smsfcore.com.

This article states the law as enacted at the date of writing, checked against the Federal Register of Legislation (C2026A00049). The companion rule page sets out the commencement arithmetic: the 10 August 2026 borrowing change.

SMSF Core is an information tool, not a licensed financial service. Talk to a licensed adviser or your accountant about your own position.