Key Highlights

• Division 296 and the restriction on new property LRBAs are enacted and apply from their stated 2026 commencement dates.

• Yes. An SMSF can still acquire residential property without borrowing, subject to the existing Investment and related-party rules.

• Rollover intervention powers, mandatory pre-registration education and uniquely identifiable bank accounts remain proposed reforms.

• Trustees should separate enacted rules from announcements and review official guidance before changing an investment or borrowing strategy.

Self-managed super fund (SMSF) trustees have rarely faced a busier stretch of change than 2026. Within a few months, Parliament has enacted a new tax on very large Superannuation balances, restricted the way SMSFs can borrow to buy property, and the Government has unveiled a broad consumer-protection package aimed squarely at the sector. At the same time, the Australian Securities and Investments Commission (ASIC) and the Australian Taxation Office (ATO) have signalled tougher scrutiny of auditors and fund establishment. For trustees, the hardest task is separating what is now binding law from what remains a Government announcement. This round-up sorts the enacted from the proposed and points to the dates that matter.

Property borrowing: now restricted, and it is law

The most concrete change for property-minded trustees arrived through the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, Schedule 5, which received Royal Assent on 26 June 2026. From 10 August 2026, a new limited recourse borrowing arrangement (LRBA) can only be used to acquire real property where that property is "business real property" as defined in the Superannuation Industry (Supervision) Act 1993 (SIS Act) — broadly, property used wholly and exclusively in one or more businesses.

The practical effect is that residential property can no longer be acquired through a new LRBA. Importantly, this is not a ban on SMSFs owning residential property. A fund can still purchase residential property outright using its own cash or existing assets, subject to the usual rules. The restriction bites only on new borrowing. Existing arrangements are grandfathered: LRBAs entered into before 10 August 2026 continue, refinancing of a pre-10-August LRBA is permitted, and binding contracts exchanged before that date are protected even if settlement or the borrowing occurs later.

Division 296: the new tax on large balances

Also now law is Division 296, introduced into the Income Tax Assessment Act 1997 by the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026. It applies from 1 July 2026 — the 2026–27 income year — with the first assessments relating to that year.

Division 296 reduces super tax concessions for individuals whose total superannuation balance (TSB) exceeds $3 million. An additional 15% tax applies to the proportion of taxable superannuation Earnings attributable to the balance above that large super balance threshold, on top of ordinary fund-level tax. A second tier applies above a very large super balance threshold of $10 million, where a further additional 10% applies (an effective extra 25% at that level). Crucially, the enacted regime calculates earnings from an adjusted amount of the fund's actual, realised Taxable Income — not the unrealised-gains approach floated in earlier proposals. The thresholds are indexed and may rise. The tax is assessed to the individual, not the fund, but SMSFs must report each in-scope member's relevant earnings in the SMSF annual return from 2026–27 onwards.

The August package: announced, not yet law

On 19 August 2026, Assistant Treasurer and Minister for Financial Services Dr Daniel Mulino announced a package titled "Protecting Consumers and the Promise of Superannuation", with further detail at the National Press Club the following day. These are Government announcements. Treasury has said it will continue consulting Stakeholders to progress legislation, so trustees should treat every element below as proposed rather than binding.

The SMSF-relevant measures include empowering the ATO to prevent rollovers to newly established SMSFs where it is investigating concerns of fraud, financial abuse, misconduct or potential harm; mandatory Trustee education before SMSF registration; a requirement for SMSFs to hold uniquely identifiable bank accounts; and improved ASIC/ATO data sharing. The package also proposes aligning the SMSF supervisory levy with fund establishment and increasing it for the first time since 2013, from $259 to $295. None of this changes a trustee's obligations today, but it signals the direction of travel.

Regulators sharpen their focus

Compliance activity is rising in parallel. In media release 26-170MR on 24 July 2026, ASIC reported action against 64 approved SMSF auditors across FY26 (1 July 2025 to 30 June 2026) — comprising 8 disqualifications, 3 suspensions, 10 sets of conditions imposed and 43 registration cancellations. ASIC framed auditors as gatekeepers of a sector holding around $1 trillion in Assets across more than 672,000 funds. Every SMSF must be independently audited each year before lodging its annual return, so auditor quality directly affects trustees. This does not imply the profession is broadly non-compliant, but it underlines that the annual audit is not a formality.

Hypothetical example

Consider the Nguyen Family Super Fund, with two members and a $2.4 million balance. In 2026, the trustees were weighing a geared purchase of a suburban rental. After 10 August, a new residential LRBA is off the table, so they instead consider an ungeared cash purchase of a commercial premises, or simply retaining a diversified share and cash portfolio. Neither member is near the $3 million Division 296 threshold, so that tax is not yet a concern — but the trustees note it is indexed and worth monitoring as balances grow. This scenario is illustrative only and not advice.

What trustees should watch next

Three timelines matter. First, the 2026–27 SMSF annual return will carry new Division 296 reporting for in-scope members. Second, property strategies must now be built around the 10 August 2026 LRBA commencement and its grandfathering boundaries. Third, the August package will move through consultation and, potentially, draft legislation — trustees should watch Treasury and ATO channels rather than act on announcements alone.

The bottom line

For SMSF trustees, September 2026 is a moment to distinguish law from proposal. Division 296 and the LRBA restriction are enacted and Demand attention now; the consumer-protection package is a signal of what may come. Given the complexity and the personal tax consequences, trustees may wish to obtain appropriately qualified financial, legal or tax advice relevant to their circumstances before making structural decisions.