Attwood Marshall Lawyers’ Property and Commercial Law Senior Associate Mieke Elzer, breaks down the looming ban on the use of limited recourse borrowing arrangements (LRBAs) by Self-Managed Super Funds (SMSFs) to acquire residential property, together with the negative gearing and capital gains tax reforms agents need to be aware of when working with buyers.
There has been significant discussion about the changes to SMSF borrowing, negative gearing and capital gains tax following the 2026-27 Federal Budget announcements.
These tax reforms can affect the timing, structure and, in some cases, the viability of transactions that agents are working on.
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Cth) passed both houses of Parliament on 25 June 2026 and received Royal Assent shortly after.
It makes three separate changes that agents should understand. The first is a ban on limited recourse borrowing arrangements for SMSF purchases of residential property, taking effect 10 August 2026.
The second is a broader reform to negative gearing, limiting the availability of negative gearing for residential property investments to new builds.
The third changes the way capital gains tax is calculated.
The stated aim of the tax reforms is to create more housing stock and to make buying an existing property more accessible for first home buyers and owner-occupiers. For many Australians, their home or investment property is their biggest financial asset, which is why these reforms have attracted so much attention.
Whatever your views on the reforms, buyers are now working within tighter timeframes and weighing up more complex decisions before they commit to a contract, and that’s exactly where a transaction can start to go wrong.
As an agent, you’re likely to encounter buyers who are affected by one or more of these changes in your day-to-day transactions over the next twelve months.
The SMSF borrowing ban
From 10 August 2026, buyers will no longer be able to use a new limited recourse borrowing arrangement (LRBA) through a Self-Managed Super Fund (SMSF) to purchase residential property. SMSFs can still acquire residential property outright using available fund assets, and they may continue to use LRBAs to acquire qualifying business real property, such as commercial or industrial premises used in carrying on a business.
The tax reforms only affect new borrowing arrangements. If a buyer already has an LRBA in place, or enters into a binding contract before 10 August 2026, transitional provisions preserve that borrowing arrangement.
Eligibility is determined when the buyer enters into a binding contract, not when finance is approved or settlement occurs. Buyers who leave their SMSF planning until the last minute risk delays in establishing the fund or bare trust, obtaining finance, or satisfying finance conditions before the deadline.
Agent takeaway: If a buyer tells you they are purchasing through an SMSF, ask early whether their SMSF, bare trust and finance arrangements are already in place. If they are still being established, encourage the buyer to obtain legal and financial advice before making an offer or entering into a binding contract.
Negative gearing
From 1 July 2027, negative gearing for residential property investments will generally be limited to new builds.
The reforms are subject to both grandfathering and transitional provisions.
Investors who already owned an investment property or had entered into a binding contract before 7:30 pm AEST on 12 May 2026 will retain the existing negative gearing arrangements for that property for as long as they continue to own it.
Investors purchasing qualifying new builds will also continue to have access to negative gearing under the new rules.
Investors who entered into a binding contract to purchase an established residential property after the Budget announcement but before 1 July 2027 may continue to claim negative gearing until 30 June 2027. From 1 July 2027, losses from those properties can generally only be offset against income from other residential investments, with excess losses carried forward to future years.
Agent takeaway: Buyers considering an investment property may ask more questions about whether a property is a new build and when they need to commit to a purchase. While agents should avoid giving tax advice, recognising these questions early and referring buyers to their accountant or lawyer can help prevent delays later in the transaction.
Capital Gains Tax
The tax reforms also change how capital gains tax (CGT) is calculated for many investment assets. The current 50 per cent CGT discount will be replaced with an inflation-adjusted calculation together with a 30 per cent minimum tax rate, subject to transitional provisions and concessions for qualifying new builds.
The Australian Taxation Office has confirmed that investors purchasing qualifying new builds will be able to choose either the existing 50 per cent CGT discount or the new indexation method and minimum tax when they eventually sell the property. The main residence exemption remains unchanged.
Transitional provisions mean that assets bought and sold before 1 July 2027 continue under the existing rules, assets acquired on or after that date are generally subject to the new regime, and assets held before 1 July 2027 but sold afterwards will be subject to transitional calculations.
Agent takeaway: Buyers are increasingly considering not only which property to purchase, but also how they will own it and the long-term tax implications of that decision. If a buyer is unsure whether to purchase personally, through a trust, company or SMSF, encourage them to obtain legal and accounting advice before signing a contract, as changing ownership later can be costly.
Recognising the signals early
Although these reforms differ in their operation, they create the same underlying risk: buyers may assume their situation is simpler than it really is only to discover the legal and financial complexities after problems have already arisen.
In our experience, that assumption tends to show up in a handful of recognisable ways.
On the SMSF side, buyers often treat an LRBA as functionally the same as a standard home loan, and many don’t realise how much longer it can take to establish a fund, appoint a trustee, and get finance approved through an SMSF-specific lender. It is always worth asking a buyer whether the fund itself already exists, since that’s typically what takes the longest to sort out.
We are also seeing buyers assume that pre-approval or in-principle approval with their lender is enough to protect them, when really, it is the date the contract becomes legally binding that matters. If a buyer cannot tell you whether their fund is established yet, that is worth flagging.
On the negative gearing and CGT side, buyers frequently assume that if a particular ownership structure, be it personal ownership, a trust or another entity, worked well for a friend or family member, it will work equally well for their own purchase, without accounting for their unique circumstances, timing or intended use of the property.
Parents assisting an adult child into the housing market are especially prone to treating the purchase as a simple gift or loan, without considering how the property will be held or what happens down the track if that ownership needs to change.
In both scenarios, you are not expected to have the answers, and you should not try to provide them.
What you can do is notice when a buyer is moving quickly on a purchase that may be more complicated than it first appears and encourage them to seek legal advice while there is still time for it to make a difference.
Whether your buyer is racing an SMSF deadline or weighing up an established property against a new build, a short conversation with a lawyer before entering into a binding contract is far less costly than trying to resolve problems after the contract becomes legally binding.
The earlier these issues are identified, the more options buyers have and the more likely the transaction is to proceed smoothly.
Attwood Marshall Lawyers – your local property law experts
Attwood Marshall Lawyers work alongside agents, brokers, accountants and SMSF advisers to keep transactions on track however they are structured.
Our Property and Commercial Law team can assist with SMSF property purchases, investment portfolio purchases, bare trust and LRBA structuring, review of loan and mortgage documents, independent legal advice for guarantors, and general guidance on the legal requirements involved in SMSF property transactions.
Careful advice at the beginning can help avoid expensive mistakes at the end. Contact us today on 1800 621 071.
