On 23 June 2026, the Federal Government struck a deal with the Australian Greens that quietly reshaped one of the most widely used property investment structures in Australia, the self-managed super fund. From mid-August, new SMSFs will no longer be able to borrow to buy residential property. Existing arrangements are protected, but anyone partway through a purchase has weeks, not months, to lock it in.
The Mornington Peninsula has an outsized stake in this. A meaningful share of investment-held property between Mornington and Portsea sits inside SMSFs or second homes, coastal investment properties, and rentals acquired through limited recourse borrowing arrangements (LRBAs) over the past fifteen years. The changes that landed last week, combined with the broader tax reforms announced in the 12 May Federal Budget, change the calculus for owners holding here.
Here’s what’s changed, what hasn’t, and what Peninsula owners should be thinking about.
The 23 June LRBA ban explained
The amendment, secured by the Greens in exchange for Senate support of the Government’s broader tax reform package, bans new limited recourse borrowing arrangements for residential property inside self-managed super funds. Three points matter.
The ban is prospective. Existing residential LRBAs are grandfathered and continue under current rules. There is no requirement to refinance, restructure, or sell. The ban commences 45 days after royal assent, the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 is expected to pass the Senate before Parliament rises on 2 July, putting the practical ban date in mid-August. Commercial property LRBAs are unaffected; SMSFs purchasing business real property continue under existing rules.
The hard deadline isn’t really the legislation. It’s the lenders. When a similar policy was floated in 2019, the major banks withdrew their SMSF residential lending products before any law passed. The same is likely this time. If you’re considering exchanging contracts on an SMSF residential purchase, the window may be measured in weeks.
Division 296 starts 1 July
A second SMSF change commences this Tuesday. Division 296 , the additional 15% tax on the proportion of super earnings attributable to a total super balance above $3 million, applies from 1 July 2026.
Three features are worth knowing. The threshold is total super balance across all funds, not per fund, measured at financial year end. The tax applies to unrealised gains, which is a meaningful departure from how super has historically been taxed and property held in an SMSF that increases in value but isn’t sold could still trigger additional tax if it pushes the total balance above $3 million. And the threshold is not currently indexed, so more members will be caught by it over time.
For Peninsula SMSF members with high-value coastal property, particularly in Sorrento, Portsea, Mount Eliza and Mount Martha where SMSF-held assets can sit well above $2 million on their own, this is a planning conversation worth having with your accountant before the end of next week.
The point most reporting has missed
The May 2026 Federal Budget restricted negative gearing on established residential property to grandfathered holdings only. From 1 July 2027, anyone buying an established property outside super, in personal name, family trust, or company, cannot offset rental losses against other income. Negative gearing on new builds remains.
But superannuation funds, including SMSFs, were explicitly excluded from those changes.
That means an SMSF is now the only legal structure in which an Australian can purchase an existing residential property and still negatively gear it. Provided the purchase is funded by existing SMSF assets rather than an LRBA after mid-August.
For Peninsula investors looking at established stock in established suburbs, that’s a strategic shift worth understanding. The number of structures available to negatively gear an existing house in Mount Eliza or Mount Martha just narrowed to one.
What this means if you own Peninsula property in an SMSF
Three scenarios cover most situations.
If you hold an existing residential LRBA on a Peninsula property, nothing operational changes. Your arrangement is grandfathered. Existing concessional tax treatment continues, 15% on rental income in accumulation phase, an effective 10% CGT rate on assets held over 12 months, and 0% in pension phase. The one caution: industry guidance is still unsettled on whether refinancing constitutes a “new” LRBA. Get specific legal advice before refinancing or restructuring anything.
If you’re partway through purchasing a Peninsula residential property through an SMSF using borrowed funds, exchange contracts before the ban commences. Settlement can occur after the ban, the trigger is the contract date. Speak to your broker urgently; lender availability is the practical constraint, not the legislation.
If you’ve been considering setting up an SMSF specifically to buy Peninsula investment property using borrowing, the pathway closes in mid-August. Realistic alternatives are an SMSF cash purchase, commercial property under the existing LRBA rules, or a personal-name purchase of a new build under the post-July 2027 negative gearing regime.
Why the Peninsula matters more than most postcodes
This package of changes lands harder here than in most parts of Victoria. The Peninsula has one of the highest concentrations of SMSF property holdings in the state, driven by an investor demographic that skews older, asset-rich, and engaged with their super. A meaningful share of coastal investment stock between Dromana and Portsea — and a growing share of rental holdings in Mornington, Mount Eliza, Mount Martha and Hastings — sits inside SMSFs acquired through LRBAs over the past decade.
For owners watching these changes, the practical questions are whether long-held Peninsula assets in SMSFs are positioned correctly for Division 296 from 1 July, whether any restructure or refinance has been triggered or risks being triggered by the new rules, whether a planned acquisition still makes sense under the narrowing window, and how the broader Budget changes affect the long-term hold-versus-sell calculation across properties held both inside and outside super.
What to do next
If any of this affects you, the conversation belongs with your accountant and a licensed financial adviser. Hive Realty is not licensed to provide financial product advice and won’t pretend otherwise, SMSF strategy is regulated under the Corporations Act and requires properly qualified guidance.
What we can do, on the property side, is help you understand current Peninsula market values, sale timing, and where demand sits across the suburbs you may be holding or considering. If a property decision is moving up your timeline because of these rule changes, that’s a conversation we’re happy to have alongside your existing advisers.
Disclaimer
This article is general information only and does not constitute financial, legal, or taxation advice. The legislation referenced is current as at June 2026 and may change before final passage. Speak to a registered financial adviser, accountant or solicitor before acting on any of the matters discussed.
