This distinction is important for trustees, advisers and lenders considering property transactions from 10 August 2026.
What has changed?
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 has amended the LRBA rules for regulated superannuation funds. From 10 August 2026, where an SMSF enters into an LRBA to acquire real property, the property must be business real property.
This does not mean LRBAs are banned entirely. SMSFs may continue to use LRBAs for permitted assets and may continue to use LRBAs for real property where that property satisfies the business real property definition. The identity of the lender, whether bank, non-bank or related party, does not change the application of the new rules.
What is business real property?
Business real property generally means land and buildings used wholly and exclusively in one or more businesses. This is a technical superannuation law test and should not be determined simply by the property description, zoning, loan type, or whether a building looks residential or commercial.
Some properties with a residential character may still qualify as business real property in limited circumstances. For example, the ATO guidance recognises specific treatment for primary production land that includes a dwelling, provided the relevant conditions are met. Each property needs to be assessed on its facts.
What happens to existing LRBAs?
Existing real property LRBAs entered into before 10 August 2026 are grandfathered. If your SMSF already holds real property under an LRBA, the property does not need to become business real property merely because of the law change.
The ATO has also confirmed that refinancing an existing LRBA entered into before 10 August 2026 is not impacted by the new rules. However, trustees should still obtain advice before refinancing or materially varying an arrangement, particularly where the refinance involves different loan terms, a related-party lender or additional borrowed amounts.
While the policy debate has largely focused on residential property, the final law operates by reference to whether the real property qualifies as business real property under the superannuation rules. This distinction is important for trustees, advisers and lenders considering property transactions from 10 August 2026.
We're here to help
If you have an existing LRBA, are considering refinancing, or are assessing whether a proposed property may qualify as business real property, please contact one of our superannuation specialists to discuss your circumstances.
The above information is provided as an information service only and, therefore, does not constitute financial product advice and should not be relied upon as financial product advice. None of the information provided takes into account your personal objectives, financial situation or needs. You must determine whether the information is appropriate in terms of your particular circumstances. For financial product advice that takes account of your particular objectives, financial situation or needs, you should consider seeking financial advice from an Australian Financial Services licensee before making a financial decision in relation to any of the matters discussed.
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