Fresh figures have shown that the federal government’s ban on new SMSF residential borrowing is hitting a much larger market than policymakers anticipated.
New data from the Australian Finance Industry Association (AFIA) has revealed that its specialist non‑bank lender members wrote more than 16,000 new residential loans to self‑managed super funds (SMSFs) in the financial year 2026, backed by $10.3 billion in security.
This is compared with the government’s working assumption of around 4,000 new limited recourse borrowing arrangements (LRBAs) a year.
The figures arrive weeks before the new prohibition on residential property borrowing through SMSFs takes effect on 10 August.
The reforms prevent regulated super funds from entering new limited recourse borrowing arrangements (LRBAs) to acquire residential property while preserving existing arrangements and refinances of pre-existing loans.
AFIA gathered preliminary figures from 13 lender members – out of a total membership of about 150 – which actively write SMSF residential loans.
On that basis, the association said the true market was likely larger than the 16,000‑loan tally, meaning the ban reaches into a substantial slice of investment lending rather than a niche product line as previously suggested by the government.
AFIA CEO Diane Tate said the numbers significantly contracted the information released by the government when announcing the measure.
“This is not a small or marginal segment of the lending market. Our members alone wrote over 16,000 new residential SMSF loans in FY26,” she said.
“The ATO estimate of 4,000 per year is based on data that Treasury officials have acknowledged is around three years old. The policy was designed around an incomplete picture and supposedly a review conducted well over a decade ago.”
AFIA has previously warned that the measure risks undercutting investment pipelines for new housing at the same time the government is attempting to lift dwelling completions.
Conservative gearing undermines systemic risk case
AFIA’s member data also revealed that residential SMSF loans were written at an average loan‑to‑value ratio (LVR) of around 67 per cent, well below the typical 70–80 per cent LVR range seen in mainstream residential investment lending.
Tate said those characteristics contracted the systemic‑risk rationale that was cited by the government in support of the ban.
“At an average LVR of 67 per cent, with substantial member equity contributions and a heavily supervised regulatory structure, the systemic risk argument does not stack up against the evidence,” she said.
AFIA pushes for targeted exemption for new dwellings
AFIA said it was not seeking to unwind the ban, but rather called for a targeted carve‑out that would allow SMSFs to continue using LRBAs to acquire newly constructed homes.
The proposed exemption would rely on the “new residential dwelling” definition already inserted into section 26‑160 of the Income Tax Assessment Act 1997.
Tate said the distinction between new and established dwellings was one the government had already embraced in its capital gains tax and negative gearing changes.
“The government has already drawn a principled distinction between new and established residential dwellings in its CGT and negative gearing reforms, preserving full concessions for new dwellings to encourage housing supply,” she said.
She added that extending the same approach to SMSF LRBAs would apply the government’s own drafting to another part of the tax and housing system.
“Applying that same logic to SMSF borrowing is internally consistent, uses the Government’s own drafting, and does not reopen the core policy agreement,” Tate said.
AFIA warned that the ban, without adjustment, would have “major implications for housing supply and competition in the mortgage market”.
[Related: Lenders, brokers say SMSF resi ban will reduce supply]
Want to see more stories from trusted news sources?
Make The Adviser a preferred news source on Google.
Click here to add The Adviser as a preferred news source.
