Government slammed for discouraging investment

After the government announced on Tuesday (23 June) that it would support an amendment from the Greens to ban future limited recourse borrowing arrangements (LRBAs) for residential property by superannuation funds, members of the broking industry have voiced their shock and dismay at the move.

The decision, which was revealed by Prime Minister Anthony Albanese and Treasurer Jim Chalmers MP on Tuesday, was part of a range of concessions agreed by the government to ensure its housing tax legislation passes through both houses.

Currently, the legislative reform - which includes widespread changes to the treatment of negative gearing and capital gains tax (CGT) for property investors, as well as tax breaks for most workers - has only passed the House of Representatives. However, having secured the support of the Greens, it is expected that the housing tax legislation will pass within the next two weeks.

In order to secure its support, the Greens had asked the government to “close the loophole on self-managed super funds investing in housing”, arguing that “wealthy property investors” were benefiting from favourable tax treatment.

For example, there is a concessional tax rate of 10 per cent that applies to capital gains made on disposal of assets held for over 12 months, or 15 per cent for those held for a shorter period, for a fund wholly in accumulation phase), whereas investors who sell a property outside of SMSFs from 1 July 2027 will be subject to a 30 per cent minimum tax on net capital gains under the new legislation.

According to the government and the Greens, the LRBA ban will be prospective, in order to “protect contracts signed before the date of commencement and provide time to finalise arrangements currently in train”. It is expected to take effect 45 days after the legislation receives royal assent.

Following the government’s announcement, members of the broking industry have sounded the alarm on what it would mean for property investment and credit availability.

Naveen Ahluwalia, the Mortgage & Finance Association of Australia’s (MFAA) executive of policy, said: “SMSFs play an important role in housing investment and restricting access to lending risks becoming another disincentive for Australians willing to invest in residential property.

“At a time of housing shortages and rental pressures, the focus should be on encouraging investment that increases housing supply, not discouraging it,” she stated.

Ahluwalia said mortgage and finance brokers, who facilitate more than 81 per cent of Australia's residential home lending, were already hearing that investors are “delaying decisions, reassessing future investments and, in some cases, stepping away from the market altogether”.

Similarly, the Commercial & Asset Finance Brokers Association of Australia (CAFBA) said that business sentiment was also being hit.

CAFBA's chair of advocacy, David Gandolfo, commented: “Commercial and asset finance broking is a real-time barometer of business sentiment, and our members are seeing an immediate retreat of capital and business investment under this policy and others announced in the Federal Budget,” he said.

The size of the LRBA market

According to the latest SMSF quarterly statistical report from the Australian Taxation Office (ATO), there were 672,805 SMSFs in Australia in March 2026, with 1.23 million members.

As at March 2026, these held $80.3 billion in assets under LRBAs, supported by $29.4 billion in borrowings.

A total of $62.7 billion of residential real property was held by these SMSFs; around 6 per cent of total assets allocated.

According to the Prime Minister, LRBA arrangements constitute less than 1 per cent of total residential property borrowing and less than half a per cent of new residential borrowing each year.

Speaking on behalf of the Australian Finance Industry Association (AFIA), chief executive officer Diane Tate said the reforms targeted a small and well-regulated segment of the lending market.

“This is a well-understood market that has operated effectively within a clear regulatory framework for many years,” she said.

“Asset limitations already apply to SMSFs and these arrangements are primarily used by Australians seeking to sensibly diversify their retirement savings,” she continued.

“This is another example of the Government not consulting on proposed tax changes that will affect credit availability and Australia's lending market.

“Technical amendments will be critical to ensure existing borrowers are not disadvantaged and the transition is orderly,” the AFIA CEO said.

“The finance industry is the transmission mechanism through which tax policy affects the real economy. Reforms of this scale should be supported by comprehensive analysis to ensure they do not create unintended consequences for credit supply and the cost of finance,” she concluded.

Both the MFAA and AFIA have raised concerns with the Senate Economics Committee about the potential impacts of the broader housing tax package on borrower serviceability, collateral values, and credit market.

The MFAA has also previously encouraged broker members to share their concerns about the proposed changes to capital gains tax (CGT) and trust taxation announced in the federal budget.

All three associations said they were committed to working constructively with Government and industry stakeholders to ensure reforms support a competitive, resilient lending market while helping address Australia's long-term housing challenges.

Brokers have also voiced concerns about the government’s proposed ban on LRBAs for residential property in super funds.

Commenting on Broker Daily, several brokers noted that the government had suggested only 1 per cent of residential property was held by SMSFs, and therefore the impact of the ban on housing supply would be limited.

Instead, they suggested that “investors are being punished for actually being pro-active and trying to create wealth for retirement”, and that “it will make no difference except put more property companies out of business”.

However, others suggested that it would reduce the instances where borrowers “use all their superannuation funds to invest in property, especially in their late 50s and early 60s, who ending up losing everything because they can’t service the debt in the first place let alone have even marginally funded retirement”.

It adds to ongoing pessimism about the proposed CGT and negative gearing changes.

In a survey of more than 200 brokers conducted by SME lender RedZed, half said their small-business clients felt either somewhat or very negative about the budget, while only 36 per cent reported a somewhat or very positive reaction.

Last month, Joseph Daoud, founder of It’s Simple Finance, spent more than $17,000 on billboards near the capital’s airport protesting the tax changes, and was part of several roundtables between brokers and the Opposition in recent weeks.

[Related: LRBAs for resi property likely to be banned]

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