LRBA ban sparked confusion and panic

The ban on the use of limited recourse borrowing arrangements (LRBA) to purchase residential real estate not considered business real property caused confusion and panic among the clients of SMSF advisers and prompted a shift in their investment focus regarding the asset class.

“[At the time of the announcement] there was a bit of confusion. Some clients were thinking ‘oh no, I’ve missed out now’. So I was really spending four to six hours on the phone in the lead-up to 10 August,” WT Wealth head of financial services Scott Averay told delegates during a panel discussion at the Class Ignite 2026 conference in Sydney yesterday.

“I think there was a lot of misinformation out there in the marketplace, but also clients were panicking. There was a real sense of panic especially [among] clients who were looking at second or third transactions.”

Fellow panellist Your Future Your Strategy managing director Gareth Coy noted his clients displayed a good deal of confusion as well, particularly as to the items they needed to have in place by the 10 August implementation date.

“People were confused [and were asking if] we need the loan in place. [The answer was] no we don’t, we just need the bare trust to be in place and a valid contract signed and binding prior to that date. And so there was definitely a run on [LRBAs],” Coy said.

From the moment of the announcement, both practitioners indicated they had also witnessed a change in client attitude toward their property portfolio allocations.

“Interestingly we observed a lot of people pivoting from buying off the plan to buying established properties and I think it was more market driven,” Coy noted.

Averay also detected a pivot in his clients’ approach toward property acquisitions using an LRBA, but in a slightly different manner with many exhibiting a focus on commercial property over residential.