SMSF investors face property crackdown

A recent major super shake-up has stopped SMSFs from buying residential properties with borrowed money, sparking a fierce debate over housing affordability and retirement savings.

The Australian government has backed a Greens’ policy to put a stop on self-managed superannuation funds (SMSFs) from purchasing residential properties with any capital assistance, arguing the sector is currently gating nearly two million properties from first homebuyers.

What has changed for SMSF property investors?

The Greens have backed amendments that would ban self-managed super funds from using limited recourse borrowing arrangements (LRBAs) to purchase residential property.

An LRBA protects the SMSF as a whole by safeguarding other assets held by the SMSF from the lender if the loan defaults.

SMSF property changes at a glance

• SMSFs have been banned from using borrowed money to buy residential property
• Existing investments are grandfathered though
• Changes would apply to new residential property purchases only with contract of sales being exchanged from August 10^th 2026 onwards
• Greens say the move will improve housing affordability for first-home buyers
• Industry groups argue the impact on housing supply would be minimal

The Greens argue grandfathering existing arrangements will allow investors to continue benefiting from tax concessions and leave around 1.7 million properties in investor hands rather than making them available to prospective first-home buyers.

Greens say reform will help first-home buyers

Greens leader Larissa Waters criticised Labor’s “low ambition” to fixing the housing crisis.

By grandfathering in wealthy property investor tax perks Labor has once again chosen to put the 1% over the millions of people trying to buy their first home.

Meanwhile, Greens senator Nick McKim added while the government is making small steps in the right direction, it has missed a “generational opportunity” to fix the burgeoning housing pressure.

“After four years in government and multiple failures to act, Australia’s housing crisis is now Labor’s housing crisis,” McKim says.

“Labor has chosen to skew this package to benefit wealthy property investors in every way they can. They have delayed relief for renters, pulled up the ladder on first homebuyers, and let the 1% keep $33bn in tax breaks.”

In response, SMSF Association chief executive Peter Burgess was disappointed in the decision, claiming that LRBAs pose “no material risk” to the super system under appropriate circumstances.

“Banning LRBAs for residential property represents a clear departure from nearly two decades of settled policy. 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 says.

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.

Will existing SMSF property investments be affected?

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.

The change will not be retrospective and will not affect existing contracts or those exchanged before August 10^th 2026.