The August law change now has updated ATO guidance
The Treasury Laws Amendment (Tax Reform No 1) Act 2026 changed section 67A of the Superannuation Industry (Supervision) Act 1993. For relevant arrangements entered into from 10 August 2026, an SMSF can use an LRBA to acquire real property only if the property qualifies as business real property under the SIS Act. Typical residential investment property is excluded.
The law took effect in August. The ATO guidance release, reported on 20 October, explains how the ATO now reads the amended rules in practice. The release was flagged by ATO SMSF branch director Kellie Grant at the SMSF Trustee Empowerment Day 2026 in Sydney.
You can read the ATO’s overview of LRBA property changes and the report on the six updated documents.
Know which guidance is open for comment
Two of the six documents are draft amendments open for consultation until 27 November 2026:
- SMSFR 2009/1: explains the meaning of business real property for SIS Act purposes.
- SMSFR 2012/1: covers key concepts in applying LRBA rules.
The draft changes reflect the new restriction. In SMSFR 2012/1, references to a “house” are replaced with “building”, and examples involving residential houses are changed to commercial or office buildings. The ATO is also making clear that the type of property used in an example must still meet the statutory BRP definition.
The ATO updated four further documents without consultation:
- SMSFR 2009/2: covers the meaning of “borrow money” under section 67 and clarifies that property acquired under the LRBA exception must be BRP.
- PCG 2016/5: addresses arm’s-length terms for SMSF LRBAs and reflects the exclusion of residential property under the new rules.
- TD 2016/16: considers non-arm’s-length income where an LRBA does not operate on arm’s-length terms, with references updated to BRP.
- PS LA 2023/1: concerns rectification directions for SIS Act contraventions, with LRBA examples updated to reflect the property restriction.
The ATO’s advice under development page provides information on draft SMSF guidance and consultation. The ATO has also identified QC107811 as an additional LRBA resource.
Check whether an existing residential LRBA is protected
The change does not automatically remove transitional protection from every SMSF that has a residential-property LRBA. The rules include protection for certain arrangements and transactions connected with the 10 August start date.
Check whether your records show that:
- The LRBA was entered into before 10 August 2026.
- The borrowing is a refinancing of an arrangement entered into before that date.
- A binding contract to acquire the property was exchanged before 10 August, even if settlement took place later.
Keep the executed loan and refinancing documents, contract exchange evidence, settlement records and trustee minutes together. This will help establish the relevant dates and transaction history if the arrangement is reviewed.
Do not assume that a property is protected simply because negotiations or preliminary paperwork began before 10 August. The relevant contract or borrowing documents need to establish that the transaction meets the transitional conditions.
Confirm that new borrowing relates to genuine BRP
A property’s label is not enough to show that it qualifies as business real property. A commercial building or office may be a candidate, but the SMSF must still satisfy the SIS Act definition and other relevant requirements.
Review the property’s actual use and supporting records. These may include lease agreements, business activity evidence, occupancy details and documents showing how the property is used. This matters because a change in use can affect whether the property continues to meet the relevant requirements during the arrangement.
For businesses that operate from SMSF-owned premises, such as offices, warehouses or retail sites, the new restriction does not necessarily prevent an LRBA. The property must genuinely qualify as BRP. By contrast, a strategy based on acquiring typical residential investment property through a new LRBA is no longer available under the amended rules.
Keep lender documents and compliance records aligned
The ATO’s updates also put renewed attention on LRBA terms. Review lender documentation against the arm’s-length guidance in PCG 2016/5. Check that loan terms, payments and supporting records are consistent with the arrangement being reported.
A practical file review can help make the position clear:
- Confirm the dates. Record when the LRBA was entered into, when the contract was exchanged and when any refinancing occurred. This helps identify whether a transitional rule may apply.
- Test the property classification. Document how the property meets the business real property definition. Do not rely only on a commercial listing or property description.
- Check the property’s use. Keep evidence of business use and monitor any change during the LRBA, as the property’s status can be affected by its use.
- Review the borrowing terms. Compare lender documents and actual payment records with the ATO’s arm’s-length guidance.
- Track the draft consultation. If the draft amendments affect your operations, review the ATO consultation material and submit comments before 27 November 2026.
Completing these checks helps keep trustee records, lender documents and reporting consistent. It also gives the SMSF a clear record of why a transaction was treated as protected or why the property was considered BRP.
Treat the ATO release as an operational checkpoint
The October guidance does not create the August restriction; it clarifies how the ATO is updating its interpretation documents following the legislative change. Trustees, lenders and businesses should therefore check both the law’s effective date and the details of the relevant transaction.
For broader context on the previous day’s Australian tax update, read our coverage of the ATO’s extension to GIC remission for family trust tax liabilities.
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