The Coalition and investor bodies have slammed Labor’s plan to shut down new SMSF housing loans.
The blowback follows the government’s agreement with the Greens to ban fresh limited recourse borrowing arrangements (LRBAs) for residential property by super funds, in return for securing the minor party’s support for its tax overhaul.
The prohibition will apply to loans entered into 45 days after royal assent, leaving existing SMSF borrowing and transactions already underway in place.
Coalition brands deal a chaotic ‘assault’ on savers
Shadow treasurer Tim Wilson used the government’s LRBA decision to say that the tax package was unravelling under Greens pressure and that ordinary savers would pay the price.
He said the second round of changes in as many weeks showed that the package was in “complete disarray”, with Wilson claiming that “Jim Chalmers no longer knows what’s in his budget. The Greens are dictating the terms”.
Wilson also framed the SMSF borrowing changes as part of a broader pattern he said would hit Australians at every stage of the housing and savings journey.
“The Albanese government has declared war on small businesses and self-managed superannuants, and now we’re increasingly in a position where Australians are questioning how they’re going to get ahead,” he said.
He went further on retirement outcomes, describing the SMSF changes as “a direct assault on Australian retirees”.
“If they’re a young Australian and they’re saving to get ahead to be able to save a home deposit, they’re going to be hit by Labor. If they’re going to seek to buy their first home, they’re going to be targeted by Labor,” Wilson said.
“If they’re renting, they’re going to be targeted by Labor. And if they want to retire with security, they’re going to be targeted by Labor.”
He also said that the Greens–Labor deal contained more than had been publicly laid out.
“With the Greens, while they might make announcements initially, there is often a long tail of the detail that is not being revealed to the Australian people,” he said.
Investor advocates warn of lost diversification and shifting rules
Property Investment Professionals of Australia (PIPA) chair Cate Bakos said the LRBA ban would land hardest on investors who had been using SMSFs as a way to add property to their retirement mix when their personal borrowing capacity was already stretched.
“Investors – including families with strong SMSF balances and high household expenses – have often turned to SMSFs when their ability to sustain an additional mortgage has been restrictive,” she said.
“These investors will miss out on this opportunity to build future wealth within their respective superannuation funds.”
Bakos said that the ban would not only limit access to housing assets but also narrow the range of investments SMSFs can sensibly hold.
“In addition, this move will negatively impact asset diversification within SMSFs. Given that most self-managed superannuation balances are insufficient to purchase property outright, meaning that a limited borrowing recourse arrangement is often the only option for a fund to invest in direct property,” Bakos said.
She also pushed back on any suggestion that the LRBA market had been loosely regulated.
“Since limited recourse lending was introduced in 2008, lending for property within SMSFs has always been far tighter and more restrictive than borrowing in personal names. It required lawyer input and a signed off strategy from a qualified AFSL representative,” she said.
Bakos further said that SMSF residential borrowing remained an extremely small share of the overall market.
“It also represents a very small percentage, about 1 per cent, of the overall residential market, so this indeed feels like a strange demand from the Greens to secure their support for the reforms,” she said.
Bakos said that the shift cut against earlier assurances, calling it “a surprising concession from the Labor Government, given that the Federal Treasurer was emphatic that SMSF lending arrangements for residential property would remain unchanged in the lead up to today’s announcement”.
Buyer’s agents association questions link to affordability
Real Estate Buyers Agents Association (REBAA) vice-president Zoran Solano echoed the argument that SMSF borrowers were too small a group to be blamed for Australia’s housing challenges.
“SMSF property investors represent a very small proportion of Australia’s housing market, so it’s difficult to argue they are driving the nation’s housing affordability challenges,” he said.
He said that targeting such a narrow segment of investors would do little to address the structural shortage of homes.
“If SMSF residential property represents such a small percentage of Australia’s housing market, the real question isn’t whether SMSFs should be banned from borrowing,” he said.
“The real question is why we’re focusing on a fraction of the market while Australia’s housing supply challenges remain unresolved.”
[Related: Government agrees to ban future LRBA for resi]
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