What Is Grandfathered?
The ATO states that the following arrangements are not affected:
- Existing residential property LRBAs entered into before 10 August 2026.
- Refinancing of existing residential LRBAs entered into before 10 August 2026.
- Binding contracts exchanged before 10 August 2026, even if settlement or loan drawdown occurs after 10 August 2026. [ato.gov.au]
Practical Interpretation
For SMSF trustees who wanted to preserve access to residential LRBA borrowing, the critical issue was generally to have:
- A valid SMSF structure in place.
- A holding (bare) trust established.
- The trustee of the holding trust appointed.
- The property contract executed in the correct names before 10 August 2026.
- A binding acquisition arrangement entered into before commencement. [ato.gov.au], [realestate…alc.com.au]
Can Finance and Settlement Occur After 10 August 2026?
Based on the ATO guidance, yes, where the acquisition is protected by the transitional provisions. The ATO expressly states that binding contracts exchanged before 10 August 2026 remain protected even if the LRBA is entered into or settlement occurs after that date. [ato.gov.au]
Areas Still Requiring Care
What remains important is proving that the arrangement was genuinely entered into before commencement. The ATO guidance specifically refers to binding contracts exchanged before 10 August 2026. It does not state that:
- an unsigned contract,
- finance pre-approval,
- negotiations,
- verbal agreements, or
- merely establishing a bare trust
would be sufficient on their own. [ato.gov.au], [collinshume.com]
Bottom Line for SMSF Clients
If an SMSF:
- signed a binding residential property contract before 10 August 2026,
- had the correct bare trust structure established, and
- can demonstrate the acquisition arrangement existed before commencement,
the purchase should generally be grandfathered and may proceed to finance approval and settlement after 10 August 2026. [ato.gov.au], [rm.net.au]
As an SMSF auditor and tax agent, I would recommend retaining a complete evidence file (contract, bare trust deed, trustee resolutions, lender correspondence, and dated legal documents) to support the fund’s entitlement to the transitional relief if reviewed by the ATO.
Call: SMSF Auditor 1800 123 TAX or Book: www.northcityaccountants.com.au/booknow.
