What happens to your existing SMSF property loan?
If your SMSF currently has a Limited Recourse Borrowing Arrangement (LRBA) for residential property, existing loans are grandfathered under the legislated 2026 reform package — meaning they can continue under the current terms even though new residential property LRBAs are prohibited.
What grandfathering means
Under the legislated rules:
- Your existing SMSF LRBA continues as contracted
- You make repayments as scheduled
- The loan terms (interest rate, repayment schedule) remain in place
- The SMSF continues to hold the property
What may remain uncertain
Several finer points remain to be settled in the detailed rules:
Refinancing: If you want to refinance the existing LRBA — for a better rate, to switch lenders, or to extend the term — it is not yet clear whether this would affect grandfathered status. Industry bodies are advocating for commercial refinancing to be permitted without losing grandfathering.
Top-up borrowing: Drawing additional funds on an existing facility (increasing the loan amount) would likely be treated as a new borrowing and may not be grandfathered.
Fixed to variable conversions and other loan variations: Minor administrative variations may or may not affect status — this needs legislative clarity.
Commercial property LRBAs
The legislated changes apply only to residential property. Commercial property LRBAs — including your business premises or other commercial investments — are unaffected and can be taken out as new arrangements after the commencement date.
Actions to consider
- Do not rush to make loan changes without advice — some changes may inadvertently affect grandfathered status
- Review your SMSF's trust deed and LRBA documents with your SMSF administrator
- Consider whether refinancing is important and seek advice on the risk before the detailed rules are settled
- Maintain full documentation of when the LRBA was established as evidence of existing grandfathered status