Non-bank lenders have mounted a joint campaign against the federal government’s SMSF residential borrowing crackdown.
Australia’s non-bank lenders have blasted the Albanese government’s decision to outlaw new SMSF borrowing for residential property - warning that the ban will damage retirement outcomes, distort competition and sow chaos in live deals.
The backlash follows the federal government’s agreement with the Greens to prohibit future limited recourse borrowing arrangements (LRBAs) by SMSFs for residential property as part of a deal to secure support for its tax overhaul in the Senate.
Under the agreement, new residential SMSF loans written under an LRBA structure will be blocked 45 days after the legislation receives Royal Assent - while existing facilities and contracts in train will be grandfathered.
In a joint statement released on Thursday (25 June), eight non‑bank lenders said they were “concerned” by the policy and argued it would “disadvantage ordinary workers, undermine retirement saving strategies and weaken competition in lending markets.”
They also criticised the absence of consultation and the short transition window, stating that key details of how pipeline deals and future refinancing would be treated remained unclear.
‘Responds to yesterday’s market, not today’s’ says Pepper Money CEO
Pepper Money chief executive Mario Rehayem said the policy revived an outdated recommendation made before the recent wave of superannuation and prudential reforms, and failed to reflect how the sector had evolved.
“This change by the government is not based on current evidence. It responds to yesterday’s market, not today’s. The system has evolved, the guardrails are stronger, and the rationale for a blanket ban does not stack up. This change does not target residential property speculation and will not move the dial on housing affordability,” Rehayem said.
The lenders referenced statistics from the Australian Taxation Office (ATO) showing SMSFs collectively hold around $75 billion in LRBA‑backed assets funded by $28.9 billion of associated debt – implying gearing of roughly 39 per cent across the segment.
They stressed that this leverage sat below typical loan‑to‑value ratios in mainstream housing finance and that LRBA‑related residential lending represented under 0.5 per cent of new flows each year - suggesting limited systemic risk.
Liberty Financial chief executive James Boyle said that track record demonstrated the LRBA market had been operating within tight boundaries.
“What this does is shut down a tightly regulated and important financial service with a long record of safe operation. While it’s a small part of the broader lending market, for working Australians with an SMSF it has a really important role in their retirement savings strategy,” Boyle outlined.
“Preventing the use of modest borrowing for residential property will disadvantage many Australians and limit their ability to maintain a diversified portfolio, particularly in times of global and market uncertainty.”
Challenging the ‘wealthy speculator’ narrative
The statement repeatedly stressed that typical LRBA borrowers were middle‑income workers, with Resimac chief executive Pete Lirantzis stating his firm’s client base did not match the government’s statement that SMSF trustees were predominantly wealthy investors.
“The premise that SMSF residential property borrowers are wealthy is far from the truth. Our portfolio reflects a broad range of Australians, many using relatively modest SMSF balances as a pathway to a form of home ownership,” Lirantzis said.
Firstmac managing director Marie Mortimer said that many trustees used geared property in super as a practical way to secure a primary residence for retirement.
“For many SMSF trustees, this is not about speculation, it is about using their superannuation as a practical pathway to own property for retirement and build long-term financial security,” she explained.
“Removing that option risks locking Australians out of the property market and leaving them facing a lifetime of renting in retirement. This also runs counter to the Government’s stated objectives and, in practice, property within SMSFs will now only be accessible to those wealthy enough to purchase outright, rather than ordinary Australians in their thirties, forties and fifties planning for retirement.”
Bluestone chief executive Mark Jones argued the change would be felt most by younger borrowers who had taken an interest in building their own retirement savings.
“SMSFs are not just for wealthy or older Australians. Many younger Australians are actively engaging with their retirement savings. This policy risks penalising those Australians taking responsibility for their financial future and removes a viable pathway for building retirement security,” Jones said.
Diversification fears and portfolio construction
The lenders are also worried about what the change means for how SMSFs can spread risk across asset classes, with Thinktank chief executive Jonathan Street noting that the policy would make it harder for some trustees to run balanced portfolios.
“Diversification is a core principle of prudent retirement planning, yet this measure makes it more difficult for SMSF trustees to maintain a balanced mix of assets across shares, fixed income, cash and property; just as other super funds do and will continue to be able to do,” he said.
ColCap Financial Group chief executive Andrew Chepul argued that the government had opted for the most sweeping option instead of refining existing safeguards.
“This is not unchecked activity — residential property is a legitimate part of a diversified retirement portfolios,” he said.
“Rather than applying targeted, calibrated settings, the Government has chosen a blanket approach. Removing residential SMSF borrowing does not eliminate demand for property investment within superannuation.”
Non‑banks warn of competition hit and deadline pressure
With the major banks having exited SMSF resi loans years ago, non‑bank lenders have effectively been the only source of LRBA funding for trustees, with the group stating that closing this channel would reduce competitive pressure.
“This is another setback for the segment of the market that drives competition, innovation and choice. The major banks exited this space years ago,” RedZed chief executive Calvin Cordle said.
“Non-bank lenders have since developed expertise and served borrowers responsibly.”
Cordle also highlighted the practical crunch created by the 45‑day transition period once the law is in force.
“There are pipeline deals, signed contracts, approved loans and scheduled settlements now facing a 45-day deadline,” he said.
“These are not speculative — they involve real people who have already incurred costs in reliance on a well-established framework. The government must urgently clarify how these borrowers will be treated.”
Industry floats ‘one property’ compromise
While the lenders want the government to rethink the ban, their alternative suggestion is for the government to allow each SMSF to borrow, on a limited recourse basis, for a single residential property.
“If the government is determined to act, a more proportionate approach would be to allow borrowing for a single residential property within an SMSF,” Rehayem said.
“This would preserve diversification, maintain appropriate guardrails, support trustee choice, and better align with the Government’s stated objectives.”
The lenders also presed for immediate guidance on how pipeline transactions would be treated, confirmation that refinancing of existing residential LRBAs would remain possible, and detailed instructions for borrowers, lenders and brokers ahead of the cut‑off.
“This policy was introduced without consultation, detailed modelling or evidence of systemic risk. It should be reconsidered before it materially reduces Australians’ capacity to build sustainable retirement savings,” Rehayem outlined.
[Related: SMSF resi ban ‘a grenade’, warn brokers]
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