What the Addendum covers
The Addendum updates an existing ATO ruling, TD 2016/16, which deals with when income earned by a self-managed super fund (SMSF) counts as non-arm's length income because of a limited recourse borrowing arrangement (LRBA) with non-commercial terms.
Law change reflected in the update
The update reflects a law change that stops SMSFs from using an LRBA to buy real property unless that property is business real property. This restriction applies to LRBAs entered into on or after 10 August 2026.
Existing LRBAs entered into before 10 August 2026 are not affected by this change, according to the Addendum.
Changes made to the ruling
- The ruling's worked example, previously about commercial property, has been replaced with an example about an SMSF buying business real property
- Terminology throughout the ruling has been updated from commercial property to business real property
- A note has been added pointing to separate 2024 law changes on non-arm's length expenses, which are covered in a different ATO guide, LCR 2021/2
Key actions
- SMSF trustees planning a new limited recourse borrowing arrangement on or after 10 August 2026 are required to confirm the property being acquired qualifies as business real property before proceeding
- Trustees can check whether any existing LRBA entered into before 10 August 2026 is affected - the Addendum states these are not impacted by the new restriction
- SMSF advisers or accountants can be consulted about how the updated TD 2016/16 and the related guide LCR 2021/2 apply to a fund's borrowing arrangements
- The full consolidated version of TD 2016/16 (as amended) is available on the ATO legal database before relying on the ruling for a specific arrangement
This is a plain-English summary for information only, not legal or compliance advice. Always check the official source or consult a qualified professional.