Naz Randeria, director of Reliance Auditing, said the ATO’s own data shows SMSF borrowing is modest, tightly regulated and often used to support productive commercial assets rather than housing speculation.
The spectre of a change to LRBA regulations is back on the agenda with the release at the end of December of the new Division 296 legislation.
The legislation requires the support of the Greens and already the party has raised its concerns over LRBAs and SMSFs.
Greens senator Nick McKim said in Senate estimates at the beginning of December last year that changes to the legislation were making superannuation a place to build wealth and had become an estate planning tool rather than a vehicle to ensure a dignified retirement.
He also asked Finance Minister Katy Gallagher why, when there is a general prohibition on super funds from borrowing to fund investments, that SMSFs are still able to enter into LRBAs.
The use of LRBAs by self-managed super funds was one of the sticking points from the Greens in their conditions for passing the first draft of the super tax legislation.
Randeria said she has “serious concerns” about the renewed push from the Greens to ban LRBAs and said the rhetoric may be politically convenient, but is not grounded in evidence, ignoring how LRBAs are used within Australia’s superannuation system.
“The claim that SMSF borrowing is distorting the housing market or creating systemic financial risk does not stand up when examined against the ATO’s own data. SMSFs are a mainstream part of the retirement system, with around 650,000 funds and roughly 1.2 million members,” she said.
“Policy decisions in this space affect ordinary Australians, not a fringe group operating at the margins.”
She continued that LRBAs are used by a “clear minority” of SMSFs and the ATO statistics consistently show that only around one in 10 SMSFs has an LRBA in place.
“Those borrowings represent only a small fraction of total SMSF assets, broadly around 3 per cent. This is not excessive leverage,” she said.
“It is a tightly constrained borrowing model that has existed for more than a decade within clearly defined legislative limits.”
Randeria said what is “particularly frustrating” is the persistent attempt to portray LRBAs as synonymous with residential property speculation.
“That narrative is misleading. While property dominates LRBA investment, which is unsurprising given the structure, a substantial proportion of LRBA assets are non-residential. Commercial property, including business premises, accounts for a significant share of LRBA usage,” she said.
“In practice, many LRBAs are used to acquire commercial property that is leased to a related party business on arm’s length terms. This is not a loophole. It is a deliberate and long-standing feature of the SMSF framework.
“Small business owners use their superannuation to acquire premises, pay market rent, and build retirement savings while maintaining business continuity. The concept of business real property is well established in law and actively administered by the ATO.”
She added the Greens’ proposal ignores this reality entirely and instead treats all LRBAs as if they are speculative housing vehicles when in fact many are tied to productive assets that support businesses, tenants, and employment.
“Banning LRBAs would not address any clearly identified problem. It would simply remove a legitimate and widely used structure from compliant trustees,” she said.
“It is also misleading to suggest that SMSFs are driving housing affordability pressures. ATO data shows that SMSF investment in residential property represents a very small proportion of Australia’s total housing market, well under 1 per cent. To claim this is crowding out first home buyers is not supported by evidence and distracts from the real drivers of housing affordability.”
Furthermore, she said the call to ban LRBAs is a solution in search of a problem.
“When policymakers ignore the ATO’s own data and persist with claims that do not survive basic scrutiny, the issue is no longer risk,” she said.
“It is credibility. SMSFs are being used as a political punching bag to advance an ideological agenda, and the sooner this is called out for what it is, the better for the integrity of Australia’s retirement system.”
Just like everything else, no evidence , just opposition.
Greens work on ideology and agenda rather than facts. If LRBAs work for one of their favoured agendas, races or genders they’d have no issues.