Setting Up an LRBA Before the Upcoming SMSF Changes: Timeframes and Requirements

With new legislation passed on 26 June 2026, Self-Managed Super Funds (SMSFs) will no longer be able to use new Limited Recourse Borrowing Arrangements (LRBAs) to acquire residential property from 10 August 2026. From this date, any real property acquired under a new LRBA must satisfy the definition of Business Real Property.

If you are considering establishing a new SMSF solely to purchase residential property before the changes take effect, it is important to understand the practical timeframes and requirements involved.

While it may seem like there is still time to establish an SMSF and arrange an LRBA before the new rules take effect, trustees should be aware that this is not an immediate process and appropriate time should be allowed for completion. Once an SMSF is established, the Australian Taxation Office (ATO) can take up to 28 days to issue a new SMSF's ABN and TFN, in some circumstances longer if they undertake additional reviews or identify issues requiring further investigation. It may also take longer for the SMSF to show as a complying superfund in the ATO SMSF lookup. These registrations are required before many of the next steps can be completed, including opening bank accounts, receiving rollovers, making contributions and progressing loan applications. To enter an LRBA, a bare trust and a bare trustee company must first be established. The paperwork to set up the bare trust is typically ready within two business days. As a result, there is no guarantee that a newly established SMSF will be ready to enter an LRBA before the 10 August deadline.

In addition, many commercial lenders require an SMSF to have a corporate trustee before approving an LRBA. Where a new SMSF is being established with the intention of entering an LRBA, the fund structure will generally need to include a corporate trustee to satisfy lender requirements.

Overall, the decision to establish an SMSF should be based on your broader retirement strategy, rather than solely on the opportunity to enter an LRBA before the new rules commence. Trustees should also consider the ongoing responsibilities of being an SMSF trustee and have a plan for maintaining the fund if the proposed LRBA or property acquisition does not proceed as planned.

Despite these changes, an SMSF can still be an excellent long-term vehicle for managing your retirement savings. If you are considering establishing an SMSF or would like to understand how these changes may affect your circumstances, please speak with your financial adviser or contact us to discuss your options.