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Government slams brakes on SMSF property investing following Labor-Greens deal
Australians will no longer be able to borrow through their self-managed superannuation funds (SMSFs) to purchase residential property under a major policy concession struck between Labor and the Greens, the Prime Minister's office has confirmed.
Prime Minister Anthony Albanese has confirmed that future limited recourse borrowing arrangements (LRBAs) for residential property will be banned as part of a deal securing Greens support for the government's controversial tax reforms in the Senate.
The move effectively shuts the door on one of the most popular strategies used by SMSF investors to acquire residential property, preventing future borrowing arrangements while grandfathering existing loans.
Superannuation funds will still be able to contribute equity to the acquisition of property, with borrowing held in an investor's personal name.
The agreement forms part of a broader package negotiated between Labor and the Greens, which also includes government support for amendments to upcoming NDIS legislation such as an eight-week extension to the NDIS inquiry.
"In addition, the Government has agreed to support an amendment that will be moved by the Greens to ban future limited recourse borrowing arrangements (LRBAs) for residential property by superannuation funds," a statement from the Prime Minister's office read.
"Superannuation funds are generally prohibited from borrowing money to invest, with the exception of LRBAs that are used by SMSFs."
The federal government sought to downplay the impact of the measure, arguing that SMSF borrowing represents only a small proportion of Australia's housing finance market.
According to the Prime Minister's office, the change affects less than 1 per cent of residential property borrowing nationally.
The government said the ban was designed to reduce risk and better protect retirement savings.
"Multiple inquiries have raised concerns that these arrangements raise risks for superannuation investors, including the 2014 Murray Financial System Inquiry conducted for the Coalition, and limiting new arrangements going forward will help protect people’s savings," the statement said.
The decision marks one of the most significant changes to SMSF property investment rules in recent years and is expected to spark debate across the property, financial advice and superannuation sectors.
Importantly, the measure will not alter existing tax settings for superannuation and will not affect current borrowing arrangements already in place.
More to follow.
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