In a submission to the Senate Economics Committee on the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026, the FAAA said that while it appreciates the Government’s concerns about the affordability of housing and the need to take action to address this, particularly for younger Australians, there are potential unintended consequences in relation to the differential tax treatment of residential property inside and outside superannuation.
“Whilst we support Australians having the opportunity to invest in established residential property via the SMSF structure, we are concerned that many of them will be convinced to do so via high pressure sales tactics without the benefit of financial advice, without a full understanding of the obligations that they are accepting as trustees of a super fund and without appreciating the risks involved with such strategies,” the FAAA said.
“We fear that this may become the next sphere of extreme consumer risk. While the Government has proposed reforms to superannuation switching (which form part of its response to the Shield and First Guardian collapses), those reforms might not sufficiently address this particular risk.”
The submission said that before the proposed changes, many Australians had a tax incentive to invest in residential property in their own name for several reasons. These included the fact that negative gearing could help them reduce their tax payable on income from other sources as well as the fact that the 50 per cent CGT discount reduced the gap between CGT paid in superannuation (an effective rate of 10%) and CGT paid in one’s own name (a maximum of 22.5 per cent at the top marginal tax rate).
However, post Budget changes, unless the property is a new build, negative gearing will no longer be available for investment in existing properties, and the CGT rate payable will increase to a minimum of 30 per cent. In addition, the new method, indexation, will expose more of the capital gain to taxation (the 50 per cent discount will only be available for new builds).
“Australians considering investment in established residential housing will therefore have a much stronger incentive to do so via the much more favourably taxed vehicle, superannuation, using a structure that can facilitate this – SMSFs,” the FAAA said.
“The carve-out of superannuation from CGT and negative gearing changes creates an opportunity for unscrupulous property spruikers and operators to actively promote this tax advantage, to persuade more Australians into investing into property via an SMSF.”
The submission noted that since the announcement of these reforms, there has been an uplift in advertising on social media, suggesting that SMSF property investment is the new big opportunity. This is on top of a recent material increase in the establishment of SMSFs.
“While this strategy can be beneficial for consumers, it carries higher risks, including high rates of gearing, very low levels of diversification, illiquidity, and risks that the regular payments required to support the strategy might exceed the ability of the consumer to contribute to their super,” the submission said.
“The government’s existing superannuation switching reforms do not address this particular risk. We believe further work is needed to identify targeted reforms that will reduce the risk of investors being directed into property investment that might not be in their best interests.”
The FAAA made several key recommendations, including higher standards for starting an SMSF, enhanced warnings and a requirement to complete online training before individuals are cleared to set up an SMSF.
Additionally, it recommended limitations on Limited Recourse Borrowing Arrangements (LRBAs) and a prohibition on SMSFs investing in property development.
Furthermore, the FAAA said there should be limitations on advertising which refers to property in connection with SMSFs and stronger guidance on the importance of diversification for SMSFs.
CPA also urges caution
Meanwhile, the CPA has recommended that the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 be substantially improved or deferred, warning the government is attempting to push through the most significant tax changes in a generation on the back of an inadequate and rushed consultation process.
CPA Australia Tax Lead Jenny Wong said while the organisation supports well-designed tax reform, the current Bill is technically deficient, falling short of the standard required for legislation of this scale.
“This is not a case of resistance to reform – it is a case of reform that could be done better,” Ms Wong said.
“The Bill has been introduced without an exposure draft, without a consultation paper, and without formal stakeholder engagement and the cracks are showing.”
Stakeholders were given just 11 days to respond to legislation that will affect millions of Australians, while the Committee has only 24 days to report.
“That timeframe is simply not fit for purpose for reforms of this magnitude and complexity. This rushed process has produced avoidable errors that could have been caught through proper consultation,” Ms Wong said.
CPA Australia’s submission to the Senate Economics Legislation Committee includes new estimates showing that reforms will impose substantial costs on Australian taxpayers.
Ongoing annual compliance costs are estimated to be between $295 million and $542 million, while one-off transitional costs, driven largely by the requirement for millions of Australians to establish market values for CGT assets from 30 June 2027, are expected to range from $675 million to $825 million at a minimum.
“The compliance burden is real, it is sizeable, and it will fall disproportionately on everyday Australians rather than the high-wealth investors that this policy was intended to target,” Ms Wong said.
CPA Australia proposed a three-tier framework, including retaining the 50 per cent CGT discount for active business assets where aggregated turnover does not exceed $20 million.
“This is a practical, targeted fix that protects genuine small business investment without undermining the broader policy intent,” the submission said.
CPA Australia has also raised serious concerns about the use of ministerial instruments to define critical aspects of the reform, none of which have been released. The Bill relies on nine separate ministerial instruments to determine who is taxed, at what rate, on which assets, and under what conditions – including the definition of ‘new residential dwelling’ (eligible for CGT concessions) and an alternative method to apportion capital gains pre and post 30 June 2027.
“Parliament is being asked to pass a reform where the key policy settings do not yet exist in a visible or testable form,” Wong said.
“That is not an acceptable way to legislate on matters of this significance.”
CPA Australia has called for these instruments to be subject to affirmative resolution by both Houses of Parliament before taking effect.
