In a deal with the Greens to pass the new Budget CGT and negative gearing laws, the Government agreed to an amendment that would see the end of LRBAs for SMSFs.
In its dissenting paper submitted to the Senate earlier in the week, the Greens made a recommendation to “prevent self-managed superannuation funds being spruiked to acquire tax-sheltered residential property, the exemption to the prohibition on SMSFs being able to borrow to fund investments (limited recourse borrowing arrangements) must end”.
The Greens also said they hold significant concerns that as a result of the proposed changes, people will flock to SMSFs as the remaining vehicle able to purchase tax-advantaged residential properties.
“Since the budget there has been a surge of social media advertising (below) that encourages people to ‘turn your super into a property portfolio’, advertising SMSFs as a ‘budget loophole’ and explaining ‘why SMSF is now king’,” its paper said.
Its submission continued that “Labor has a massive majority in the House of Representatives, the opposition is in disarray, and the Greens made it clear we were ready to pass progressive and ambitious tax reform”.
“This was a once-in-a-generation opportunity for genuinely progressive tax reform to pass the parliament. If the Government were serious about reducing inequality and fixing the housing crisis, now was the time,” it added.
SMSF Association chief executive Peter Burgess said the association is disappointed the Government has agreed to the Greens’ demand.
“Review after review has found LRBAs pose no material risk to the superannuation system. Banning LRBAs for residential property represents a clear departure from nearly two decades of settled policy,” he said.
“If property spruikers and high-pressure sales tactics are the issue, the answer is to target that conduct directly and not trade away LRBAs investing in residential property just to secure passage of their Federal Budget tax measures.”
Burgess continued that LRBAs are a legitimate investment tool that, when used appropriately and under existing regulatory safeguards, allow individuals to invest in assets through their self-managed superannuation fund that they may not otherwise be able to do.
“The problem is not the borrowing structure itself, but the conduct of those who aggressively market unsuitable property investments and make unrealistic claims about returns and retirement outcomes,” he added.
“Many investors and self-managed superannuation fund trustees have made legitimate financial commitments based on the existing rules. Any changes to LRBA rules should include appropriate consultation and grandfathering provisions or a substantially longer implementation period to ensure investors are not left high and dry midway through a significant financial commitment.”
Naz Randeria, director of Reliance Auditing Services, said in her opinion this decision appears driven more by political negotiation than by economic evidence.
“The government has reportedly agreed to restrict future SMSF borrowing arrangements as part of a deal with the Greens. If policy affecting retirement savings is being shaped primarily to secure parliamentary support, Australians are entitled to question whether the broader economic consequences have been properly considered,” she said.
“The focus should be on what delivers the best outcomes for the economy and retirement system, not on political horse-trading.”
Nicholas Ali, head of SMSF technical services for Neo Super, said the Greens have forced the Labor government to use LRBAs as “a sacrificial lamb” to get the Prime Minister’s signature tax package through the Senate.
“The drivel about SMSFs borrowing through LRBAs contributing to rising property prices and crowding out first home buyers has been doing the rounds for the last 15 years. It wasn’t true then, and it isn’t true now,” he said.
“The Australian housing market is worth approximately $12.6 trillion according to several sources. According to the March 2026 quarter ATO statistics, total SMSF allocation to LRBAs is $80 billion and presumably this also includes LRBAs to buy assets other than property. Therefore, SMSFs investing in property through LRBAs are an imperceptible percentage of residential property in this country and are in no way crowding out first home buyers.”
Ali continued that Australia’s housing affordability problems are primarily caused by a shortage of available residential land near jobs and services in metropolitan centres, coupled with a rapidly growing population.
“Additionally, restrictive planning laws and a decline in public housing have exacerbated the crisis, making it difficult for many Australians to afford homes. This just smacks of pure politics and has nothing to do with fair policy-making,” he said.
SMSF Alliance principal David Busoli said that, in yet another broken promise, the Government has agreed to the Green’s demands to remove the ability for SMSFs to borrow as a condition of the Green’s support in the senate to push through the government’s highly contentious budget.
“The Greens have been implacably opposed to SMSFs generally and limited recourse borrowing in particular, even though the use of LRBAs has been, in the main, appropriate and a legitimate vehicle for superannuation members, including younger members, to save for their retirement,” he said.
“Also, demonstrably, the effect on the availability of homes for new home buyers has been negligible. The Greens opposition is ideological and in keeping with their opposition to individual aspiration.
“Their position reminds me of a conversation I had with a Chinese entrepreneur who described his family’s experience during the Cultural Revolution. The cadres branded their family as rich because they had 100 ducks and 50 fruit trees when others only had 10 ducks and 10 fruit trees. Their solution was to kill 90 ducks and uproot 40 fruit trees.”
He said the change will not be retrospective and will not affect existing contracts or, presumably, those entered into before the measure becomes law though details are yet to be clarified.
I hate Govt intervention but as a SMSF practitioner, maybe this has been a long time coming, which is why the Greens have been using this ban as a bargaining chip for the last 10 years, it’s just no one needed them to get legislation passed that badly until now.
As clients, SMSFs with pretty much only a property and a loan are typically on the “cheap” side, usually financially illiterate, and constantly asking questions, but don’t want to pay.
They are sold an enticing dream of accessing super equity they don’t have personally by some “spruiker” selling over priced property or off-the -plan, with almost no details of what their SMSF responsibilities are.
Usually they were not told so have no idea about their reporting responsibilities, a written investment strategy, requiring an annual audit , market value appraisals, even providing receipts and statements.
Providing SMSF admin to such clients is like pulling teeth, it’s a constant struggle, and every accountant/SMSF administrator reading this knows it.
One new SMSF client was irate about having to do financial statements and an audit. I said, “you just signed an ATO declaration that says you would, and had it witnessed”!
I hate to see opportunities and flexibilities removed, but SMSF borrowing has been abused, many like lambs led to the slaughter as it were, so a ban might be better for all concerned.
This is just dumb policy if you can call it policy. Every SMSF asset can’t be used by Trustees and directly add to the rental pool. Why do you want to punish renters and kill rentals?