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# Self-managed super funds banned from new home loans, 3,613 contracts at risk
- URL: https://www.bushletter.com/smsf-borrowing-ban-puts-3-613-home-contracts-at-risk/
- Published: 2026-08-17T23:00:00.000Z
- Updated: 2026-08-19T06:24:26.000Z
- Description: Self-managed superannuation funds have been able to borrow under limited recourse borrowing arrangements, or LRBAs, to buy investment property since the Superannuation Industry (Supervision) Act 1993 first permitted the practice.
- Author: Editor
- Tags: Finance, Australia, Property

![Fiona Sterling](https://res.cloudinary.com/dz77sb7j1/image/upload/v1774262580/bushletter/authors/fiona-sterling.png)

By **Fiona Sterling** · 2026-08-17

TLDR

3,613 signed detached home contracts are in limbo after the ban on new SMSF borrowing for residential property took effect. Builders expect roughly two-thirds of those contracts to be cancelled, while industry bodies warn the flow-on damage to apartment pipelines and tax revenue will be substantial.

KEY TAKEAWAYS

01Builders surveyed by HIA expect 2,415 of 3,613 SMSF-backed contracts, or 66.9%, to be cancelled.

02Detached housing commencements could fall 3.5 to 5%, costing state governments over $450 million in lost tax revenue.

03About 22,000 off-the-plan apartments risk stalling, concentrated in Melbourne, Brisbane and western Sydney.

04More than 70% of surveyed builders reported a drop in investor enquiries since the Federal Budget announcement.

05Contracts exchanged before 10 August 2026 are exempt and may still settle under LRBA rules months later.

## What the ban covers and who is affected

Self-managed superannuation funds have been able to borrow under limited recourse borrowing arrangements, or LRBAs, to buy investment property since the Superannuation Industry (Supervision) Act 1993 first permitted the practice. The structure limits the lender's claim to the purchased asset, so the rest of the fund's retirement savings stay protected if the deal goes wrong. That mechanism is now closed for residential property.

The Treasury Laws Amendment (Tax Reform No 2) Bill 2026 passed Parliament and prohibits SMSFs from entering new residential LRBAs from 10 August 2026.[\[2\]](https://www.smsfassociation.com/media-release/smsf-association-to-use-roundtable-discussion-to-push-for-new-property-exclusion?at%5Fcontext=49448&ref=bushletter.com) Transitional rules allow contracts exchanged before that date to proceed to settlement under the old rules, but every new purchase from that point forward must be funded without SMSF borrowing.[\[2\]](https://www.smsfassociation.com/media-release/smsf-association-to-use-roundtable-discussion-to-push-for-new-property-exclusion?at%5Fcontext=49448&ref=bushletter.com) The practical consequence lands on two distinct parts of the housing market: detached home builders with signed but unstarted contracts, and apartment developers counting on SMSF presales to unlock construction finance.

## HIA survey findings: 3,613 contracts, 66.9% cancellation estimate

A Housing Industry Association survey of Australia's largest detached home builders found they currently hold 3,613 signed contracts backed by SMSF limited recourse borrowing arrangements that have not yet commenced construction.[\[1\]](https://hia.com.au/our-industry/newsroom/economic-research-and-forecasting/2026/07/housing-supply-set-to-fall-as-thousands-of-new-home-contracts-face-cancellation?ref=bushletter.com) Those builders estimate 2,415 of those contracts, equal to 66.9%, are likely to be cancelled now that the ban is in force.[\[1\]](https://hia.com.au/our-industry/newsroom/economic-research-and-forecasting/2026/07/housing-supply-set-to-fall-as-thousands-of-new-home-contracts-face-cancellation?ref=bushletter.com)

The damage extends beyond contracts already signed. More than 70% of surveyed builders reported a decline in investor enquiries since the Federal Budget first flagged the measure, and almost 90% expect detached housing commencements to fall during 2026 and 2027 as a direct consequence.[\[1\]](https://hia.com.au/our-industry/newsroom/economic-research-and-forecasting/2026/07/housing-supply-set-to-fall-as-thousands-of-new-home-contracts-face-cancellation?ref=bushletter.com) HIA calculates the combined effect of cancellations and weaker forward sales will reduce detached commencements by between 3.5% and 5%, stripping more than $450 million in GST and stamp duty revenue from state governments.[\[1\]](https://hia.com.au/our-industry/newsroom/economic-research-and-forecasting/2026/07/housing-supply-set-to-fall-as-thousands-of-new-home-contracts-face-cancellation?ref=bushletter.com)

HIA Chief Economist Tim Reardon said the ban on SMSFs building new homes undermines the governments' objective of building 1.2 million homes and improving housing affordability.[\[1\]](https://hia.com.au/our-industry/newsroom/economic-research-and-forecasting/2026/07/housing-supply-set-to-fall-as-thousands-of-new-home-contracts-face-cancellation?ref=bushletter.com)

## Apartment market exposure

The detached sector's 3,613 contracts represent only part of the story. Consultancy Charter Keck Cramer has estimated around 22,000 off-the-plan apartments may also not proceed, with the risk concentrated in Melbourne, Brisbane and western Sydney. Apartment developers routinely need a minimum volume of presales before a bank will release construction finance, and SMSF investors have become a reliable source of those presales.

UDIA National warned that SMSF investors have become an important component of the presale market, helping projects reach the thresholds required for construction financing, and that removing this mechanism will further undermine housing supply.[\[3\]](https://udia.com.au/2026/06/udia-national-says-planned-investment-ban-will-worsen-housing-supply-crisis/?ref=bushletter.com) When SMSF buyers step back, the gap does not automatically fill with other investors, and projects can sit in the pipeline indefinitely without reaching the finance trigger.

Oscar Stanley, President of the Urban Development Institute of Australia, said Australia's housing crisis is a supply problem and that if governments are serious about delivering more homes, they should be removing barriers to investment in new housing, not creating new ones.[\[3\]](https://udia.com.au/2026/06/udia-national-says-planned-investment-ban-will-worsen-housing-supply-crisis/?ref=bushletter.com)

## The exemption and the settlement timing risk

Buyers who exchanged a valid contract before 10 August 2026 are exempt from the ban and may still settle under the old LRBA rules, even if settlement occurs twelve to twenty-four months after exchange.[\[2\]](https://www.smsfassociation.com/media-release/smsf-association-to-use-roundtable-discussion-to-push-for-new-property-exclusion?at%5Fcontext=49448&ref=bushletter.com) That exemption sounds straightforward, but the SMSF Association has flagged a practical complication: off-the-plan buyers with pre-August contracts will still need an SMSF residential LRBA product available at the time of settlement, which may be well into 2027 or 2028.

SMSF Association Chief Executive Peter Burgess said that a trustee who signs a valid off-the-plan contract before 10 August 2026 may settle twelve to twenty-four months later and still need an SMSF residential LRBA product at settlement.[\[2\]](https://www.smsfassociation.com/media-release/smsf-association-to-use-roundtable-discussion-to-push-for-new-property-exclusion?at%5Fcontext=49448&ref=bushletter.com) If lenders withdraw those products in response to the ban, a buyer who is technically exempt on paper may find no product exists to complete the purchase.

The SMSF Association has been pushing for a new-property exclusion that would allow SMSFs to continue borrowing specifically to fund newly built residential dwellings, arguing this preserves the supply incentive without opening the door to speculation in existing housing stock. That position has not yet attracted government support.

## Industry response and the housing target arithmetic

The federal government's target of 1.2 million new homes by 2029 was already considered ambitious before the LRBA ban arrived. The HIA survey adds concrete numbers to what had previously been a theoretical concern: real signed contracts, with real buyers, are now expected to dissolve at a two-thirds rate, with each cancellation representing a home that will not be built and a state government that does not collect the associated GST and stamp duty.

HIA puts the aggregate revenue hit to states at more than $450 million, a figure that matters because states bear much of the cost of housing infrastructure.[\[1\]](https://hia.com.au/our-industry/newsroom/economic-research-and-forecasting/2026/07/housing-supply-set-to-fall-as-thousands-of-new-home-contracts-face-cancellation?ref=bushletter.com) The ban is in place, the 3,613 contracts are at risk, and the SMSF Association's push for a new-property exclusion remains unresolved as of August 2026.

This article contains analysis and commentary on market conditions. It does not constitute financial, investment, or professional advice. Past performance is not indicative of future results. Always consult a qualified adviser before making financial decisions.

SOURCES & CITATIONS

1. [Housing supply set to fall as thousands of new home contracts face cancellation, Housing Industry Association](https://hia.com.au/our-industry/newsroom/economic-research-and-forecasting/2026/07/housing-supply-set-to-fall-as-thousands-of-new-home-contracts-face-cancellation?ref=bushletter.com)
2. [SMSF Association to use roundtable discussion to push for new property exclusion, SMSF Association](https://www.smsfassociation.com/media-release/smsf-association-to-use-roundtable-discussion-to-push-for-new-property-exclusion?at%5Fcontext=49448&ref=bushletter.com)
3. [UDIA National says planned investment ban will worsen housing supply crisis, Urban Development Institute of Australia](https://udia.com.au/2026/06/udia-national-says-planned-investment-ban-will-worsen-housing-supply-crisis/?ref=bushletter.com)

FREQUENTLY ASKED QUESTIONS

What is an SMSF limited recourse borrowing arrangement?

It is a structure that lets a self-managed superannuation fund borrow money to buy an investment asset, usually property. If the loan defaults, the lender can only claim the purchased asset, not the rest of the fund's savings. This type of borrowing for residential property is now banned for new arrangements entered after 10 August 2026.

Can I still settle on my SMSF property purchase if I signed before 10 August 2026?

Yes, provided you exchanged a valid contract before 10 August 2026, the transitional exemption allows you to settle under the old rules even if settlement occurs well after that date. The SMSF Association has said that you will still need a lender willing to provide the LRBA product at the time of settlement, which is not guaranteed as lenders adjust their offerings.

Why does the ban affect apartment projects that are not yet SMSF-owned?

Apartment developers depend on presales to meet the thresholds banks require before releasing construction finance. SMSF investors have been a significant source of those presales. When they exit the market, some projects cannot reach the minimum presale level and construction financing is withheld, meaning the project never starts regardless of demand.

How much tax revenue could state governments lose?

The Housing Industry Association estimates the combined effect of contract cancellations and weaker future SMSF-backed sales will reduce detached housing commencements by between 3.5% and 5%, cutting GST and stamp duty revenue to state governments by more than $450 million.

![Fiona Sterling](https://res.cloudinary.com/dz77sb7j1/image/upload/v1774262580/bushletter/authors/fiona-sterling.png)

[Fiona Sterling](https://bushletter.com/author/fiona-sterling/?ref=bushletter.com)

Fiona Sterling writes about superannuation, tax and personal finance. She takes rules that are written to be confusing and explains what they mean for the money in your account.