After the LRBA ban, whither SMSF borrowing?

The ban on new limited recourse borrowing arrangements (LRBAs) for residential property within self-managed super funds (SMSFs) has reshaped a specialist lending market that was already under political pressure. Richard Chesworth of Bluestone Home Loans and Siobhan Williams of Pepper Money explain what lenders did in the weeks that followed, where grandfathered loans now need attention and why the commercial property shift demands care. A history of failed attempts to restrict SMSF borrowing bred complacency across the industry. When the change landed, it arrived without warning, leaving brokers to face a rush of misinformation while lenders worked urgently to clarify what had actually changed.

What is the LRBA ban and why did it catch the market off guard?

The ban on new SMSF residential LRBAs was not the first attempt to restrict this kind of borrowing. The Murray Financial System Inquiry flagged the risk in 2014. Labor adopted a ban as a campaign promise from 2017 to 2019. The Council of Financial Regulators reviewed the same risk in 2019 and 2022, both times finding no systemic threat to the super system. That history bred complacency. Richard Chesworth, head of specialised distribution at Bluestone Home Loans, was at breakfast when the news broke. 'I thought, here's this old chestnut again. But as I'm reading it, I'm thinking, actually, this is pretty concerning', he says. '[This time], it took everyone by surprise … it was literally overnight', he says. By late morning he was on the phone to the SMSF Association.

What misinformation spread after the LRBA ban, and how did lenders respond?

Siobhan Williams, head of mortgages, retail broker at Pepper Money, says uncertainty was the immediate challenge. 'Whenever significant regulatory change occurs, uncertainty can create as much disruption as the change itself, so our initial focus was ensuring brokers understood what had changed, what had not changed and what it meant for clients currently considering or progressing an SMSF property strategy', she says. Some lenders required evidence that a deposit came directly from the SMSF, a condition Chesworth says was never actually part of the government's guidance. Bluestone pushed guidance to brokers on what actually mattered: signing the contract in the bare trustee's name, avoiding 'and/or nominee' clauses common in Victorian and South Australian contracts, confirming a single acquirable asset and checking that older matters due to settle after 10 August also met the requirements.

Can existing grandfathered SMSF residential loans still be refinanced?

Yes, and this is where a real opportunity exists for trustees and their brokers. 'Existing grandfathered residential SMSF loans can continue to be refinanced under the legislation. This creates a valuable opportunity for trustees to review their current lending arrangements and explore ways to improve cash flow within their fund', says Williams. Pepper Money has built a like-for-like refinance solution around this. The back book rarely gets touched, though. 'Your SMSF loan, unlike a home loan or an investment loan, doesn't get reviewed. Rates are going up, so I'm going to refinance my home loan, but that SMSF loan sits there, and everyone forgets it', says Chesworth. His explanation is direct: it is not hitting the hip pocket, because it is the super fund.

Where does SMSF borrowing demand go after the residential ban?

Commercial property is getting more attention, though this is a shift in emphasis, not a straight substitution. 'Commercial property remains an important opportunity, particularly for small-business owners who want their SMSF to purchase the premises where their business operates', says Williams, noting it comes with different considerations around servicing, valuations, tenants, lease arrangements and cash flow. Chesworth is direct about who should not be driving the conversation: 'Brokers shouldn't be leading the conversation', he says, arguing that some past industry behaviour contributed to the political pressure behind the ban. Equifax found mortgage enquiries fell 12.5% year-on-year in the two months following the May 2026 budget's tax announcements and the accompanying RBA rate rises, as MPA's mortgage market coverage shows.

What technical traps should brokers watch for when refinancing existing SMSF loans?

One trap is little understood outside specialist circles. Loans settled before July 2018 sit outside the calculation of a member's total superannuation balance, as long as a refinance replaces the loan dollar for dollar. Capitalise fees or increase the balance, and that protection disappears. 'It does not happen to everyone, but some customers may get caught out, so they should seek advice on it', says Chesworth. He adds that extending a loan's term back to 30 years on refinance is not automatically a bad outcome. A fund only just servicing its debt risks being unable to cover an unexpected repair bill or, eventually, a pension payment. Extending the term may place the transaction into a positively geared position and provide the trustee the flexibility of reducing debt or further diversifying the SMSF.

What counts as business real property for SMSF borrowing, and where do brokers get it wrong?

Williams says broker education on business real property (BRP) rules is a clear gap. 'One of the most important areas for broker education is developing a stronger understanding of what qualifies as business real property. There remains significant opportunity to build knowledge around the types of commercial property that can be acquired by an SMSF and leased to a related party under the BRP rules', she says. She adds that SMSFs can still invest in residential property. The ban covers the ability to establish new LRBAs, not SMSF property investment more broadly. Chesworth warns of a specific display-home trap: a builder leasing a display home back on commercial terms qualifies as business real property today, but the same property rented as a residence once that lease ends does not, even though the physical asset has not changed.

What should brokers do right now to serve SMSF clients after the ban?

ATO data from June 2026 shows 680,301 SMSFs hold $1,107.2bn in total assets, with $83.8bn sitting in LRBAs. The loan nobody has reviewed since settlement is where brokers should start. 'It's about making sure that, if we're looking at business real property, we're providing the right credit support and advice, and linking with the accountant, the planner and the solicitor so the customer's needs are met, rather than simply distributing more property', says Chesworth. Williams argues there is a strong case for allowing SMSFs to continue borrowing for newly constructed homes. 'The policy was introduced quickly and without the level of consultation we would normally expect for such a significant change', she says. Any broker opening a new relationship with a business owner should ask early whether anyone has reviewed the fund's lending terms recently. Brokers looking for further guidance on specialist SMSF and non-bank lending can access Australian Broker's premium reports. If this is useful to your clients or colleagues, share it on Facebook, Twitter or LinkedIn.

Featured experts

Richard Chesworth: head of specialised distribution, Bluestone Home Loans; observed proposed bans on SMSF residential lending fail twice before this one, including after the 2014 Murray Financial System Inquiry and during the 2017–19 Labor campaign period; engaged the SMSF Association within hours of the announcement.

Siobhan Williams: head of mortgages, retail broker, Pepper Money; senior leader at a non-bank lender operating across Australia and New Zealand that has served more than half a million customers over more than 25 years; responsible for broker channel communication during the post-ban transition period.