Highlights

  • ATO released updated LRBA guidance on 19 October 2026 restricting new arrangements to business real property.
  • New LRBAs entered from 10 August 2026 are limited to business real property acquisitions only.
  • Existing LRBA arrangements established before 10 August 2026 remain protected under the transitional rules.
  • Safe harbour interest rates for 2026-27 are 9.35% for real property and 11.35% for listed shares.

The ATO published updated guidance on limited recourse borrowing arrangements on 19 October 2026, introducing significant restrictions on new LRBAs while protecting arrangements already in place. SMSF trustees using or considering borrowing arrangements need to understand both the new limits and the transitional protections.

New LRBAs Restricted to Business Real Property

From 10 August 2026, new limited recourse borrowing arrangements entered by SMSFs are limited to acquiring business real property. Other asset classes, including residential property and listed securities, are no longer eligible for new LRBA funding under this restriction.

The restriction applies prospectively. LRBAs established before 10 August 2026 are protected under transitional rules and may continue to operate according to their original terms. Trustees with existing arrangements are not required to restructure as a result of this change.

Safe Harbour Rates for 2026-27

For the 2026-27 income year, the ATO has set safe harbour interest rates for LRBA arrangements with related parties. Real property arrangements must carry an interest rate of at least 9.35% to fall within the safe harbour. Listed share arrangements require at least 11.35%.

These rates are relevant to the practice compliance guideline governing related party LRBAs. Meeting the safe harbour rate helps trustees demonstrate the arrangement is on arm's length terms, reducing audit and non-arm's length income risk.

Two Draft Instruments Open for Consultation

As at the release date of the updated guidance, two draft instruments relating to LRBAs were open for industry consultation with submissions due by 27 November 2026. Practitioners and fund advisers can engage with the consultation process to provide feedback before the instruments are finalised.

Trustees should review existing LRBAs in light of the updated guidance, particularly the safe harbour interest rates for the current year, and confirm that related party arrangements continue to comply with the applicable requirements.

FLAG: The source article referred to the LRBA practice compliance guideline as PCG 2016/6. The ATO's official published list designates this guideline as PCG 2016/5. Readers should verify the correct reference before citing.