The proposed LRBA amendments to the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 announced on Tuesday by the Government are now before the Senate. The LRBA amendment will prohibit SMSFs from entering into a new RBA to acquire residential property. Real property that constitutes business real property will still be able to be acquired using an LRBA.
The proposed start date is the 45th day after the amending Act receives Royal Assent. Existing arrangements entered into before commencement will be grandfathered, as would refinancing arrangements that maintain or refinance pre-commencement borrowings. Acquisitions entered into before commencement will also be protected, even where settlement occurs after commencement.
The SMSF Association said this is a significant change to the SMSF investment landscape being progressed through a late- stage amendment, without consultation or an evidence-based review process.
“RBAs have assisted many Australians to achieve better retirement outcomes in a controlled and highly regulated environment for almost two decades. They should not be constrained simply to secure passage of the Government’s Federal Budget tax measures,” the Association said.
Kevin Hogan, Shadow Assistant Treasurer and Shadow Minister for Financial Services, said the deal was a disgraceful attack on Australians who manage their own super.
“The Greens’ housing vision is clear. They do not want everyday Australians owning investment properties. They want more government control and a rental market dominated by the state and big institutional investors,” Hogan said.
“Labor has now caved to the Greens housing agenda despite the Treasurer promising he wouldn’t in only May of last year. The Government is again taking an investment option away from ordinary Australians while entrenching advantages for big institutional funds and foreign investors.”
Hogan said the changes go further than Labor’s taxes by not even allowing SMSFs to borrow to purchase a new build.
“That can only result in fewer homes being built and higher rents,” he said.
In a press conference on Tuesday, Treasurer Jim Chalmers said the changes agreed to with the Greens to prohibit LRBAs for self-managed super funds will raise around $50 million over forward estimates.
“This is a very small part of the housing market. SMSFs, for example, are less than one per cent of total residential property borrowing and less than half a per cent of new residential borrowing each year. Now, this is an important change in its own right, but it also reflects the realities of a Senate where nobody has the numbers on their own,” Chalmers said.
“When it comes to the fiscal impact, we anticipate something like a $50 million positive impact over the forward estimates. You would be aware, and others would be aware, that we have supported different versions of this in the past. We took seriously the recommendation from David Murray, hardly a scorched‑earth left wing revolutionary, who said in 2014 that we should ban these.
“We think this is an important change in its own right. It’s a little bit different to the proposal that we took to the 2019 election. In 2019, we were applying it more broadly on this occasion just to residential property.”
When questioned about the impact the change will have particularly on older women who use LRBAs to secure housing following relationship breakdowns, Katy Gallagher, Minister for Finance, Women, and the Public Service said those that use LRBAs are a “very small percentage”.
“On the issue of women who are having to re‑establish themselves post‑marriage breakdown, I think have a look right across government at all the steps that we’ve put in place over the last four years to ensure that women’s economic security is the centre of our decision making in the Budget,” she said.
“In every single budget we have done that and we will continue to do that because it is an issue for older women who find themselves out of marriages, marriage breakdown, low assets, difficult relationships to navigate, but limited recourse borrowing hasn’t been the big element of that when it’s been raised with me by women’s organisations.
“It’s been wages, it’s been super, it’s how do we ensure a good outcome through court processes?”
Criticism continues
Daniel Butler, director of DBA Lawyers, said SMSFs should be allowed to LRBA new residential dwellings to increase housing supply, and to cut this investment reduces housing supply.
“The real tax incentives are handed to large property developers, including large overseas investors and large overseas pension funds doing build-to-rent developments in Australia,” he said.
“The ability for SMSFs to continue to invest in commercial property is welcome as Australia has a lot of vacant commercial property with Victoria having the highest vacancy rate which is predicted to get worse due to the Victorian Premier, Jacinta Allan’s proposed WFH rules due to commence in September this year with many businesses considering relocating elsewhere.”
Richard Chesworth, head of specialised distribution for Bluestone Home Loans, said it is unexpected that a blanket approach has been taken to SMSF property lending.
“As others have noted, SMSF borrowing isn’t a systemic issue and when there are problems, they are usually as a result of behaviours at the edges of the system rather than the SMSF structure itself,” Chesworth said.
“Furthermore, due to the existing restrictions in the SMSF lending rules, SMSF lending is supported by a significant asset base, with loan-to-value ratios typically lower than those seen in mainstream residential lending. Around half of SMSF borrowing relates to residential property, placing it at approximately $12 billion to $13 billion, secured by $38.5 billion of residential property, in an overall residential property market exceeding $12 trillion.”
He continued that this highlights the importance of continued focus on advice, licensing and marketing practices.
“We believe financial advisers and brokers have an important role to play in upholding high standards and supporting good outcomes for borrowers.”
Aaron Dunn, Smarter SMSF chief executive, said the Greens’ negotiating position centred on housing affordability and LRBAs were caught in the crossfire.
“The argument: SMSF borrowing competes with first home buyers in the residential market and inflates prices. I’ll be direct. The promoters are the problem – not the structure itself,” he said.
Dunn continued: “LRBAs in residential property have been misused by a small but visible cohort of operators more interested in commissions than retirement outcomes. ASIC has pursued them, and rightly so. But that’s a conduct and licensing problem.
“Using it as evidence that the entire framework is distorting the housing market is, in my view, a significant overreach. Hiding behind previous reviews to now make a decision smacks of desperation of a Government back-pedalling from the backlash of their budget announcements.
“The residential property segment of the LRBA market is not material enough to be moving housing prices. This was always a policy optic play, not an evidence-based reform.”
Martin Fowler, partner with private wealth specialists Pitcher Partners, said the Government’s decision to ban SMSFs from borrowing to invest in property is yet another “nail in the coffin for the property market”.
“As investors constitute roughly one third of property owners, demand for established properties has already begun to fall as evidenced by falling property prices and plunging auction clearance rates since the Federal Budget,” he said.
“The ban on SMSF’s being able to borrow to buy investment properties will only exacerbate this downturn. The Government may obtain their wish of more affordable property but at the expense of alienating part of their constituency who must sit idly by while their biggest asset falls in value.”
Fowler added that with fewer investors in the property market, rents are likely to rise over time, hurting those most impacted by cost-of-living pressures already, in the absence of significant new supply.
“Further, if asset prices continue to fall, people feel less wealthy and so their propensity to spend will reduce, potentially cascading into a general slowdown in growth across the broader economy,” he said.
“The Government needs to be very careful what they wish for!”
The more people investing in property with their smsf, the less likely these people will be reliant on an aged government pension when they retire. Has the Government thought about that? I also seriously doubt it is the super rich that are buying investment properties under their smsf with a need to take a loan to assist with the purchase. I would think the super rich will purchase property in the SMSF outright and no need for finance.
Aaron Dunn is 100% correct……property spruikers are the main issue as they generate exorbitant commissions……approx $40k per property. They also provide false information with regards to sole purpose and CGT. ASIC should have jumped on them ages ago
The government fees, state & federal, would dwarf the $40k commission.
Chalmers said that this measure is of minor significance to the housing situation and has been taken simply to fulfil the Green’s ideological position. It’s disgraceful that the SMSF sector, already dealing with Div 296, has been hit again because the Greens see SMSF members as tall poppies needing to be cut down. The reality is that an increasing number of SMSFs are established by younger members who see no other way to enter the property market.
Rest a while David, given Div 296 and banning of LRBAs in residential property, a sad new is that Dr. Chalmers has never said this is the end of punches to the SMSF sector.