SMSF Limited Recourse Borrowing Arrangement Ban For Residential Properties

Well, that came out of left field. Another kick!

Labor and the Greens have done a deal on Tuesday just gone (23 June 2026) as part of Labor’s budget overhaul regarding negative gearing, taxation of trusts, and the CGT discount.

Self-managed superannuation funds (SMSFs) will no longer be able to borrow to fund a residential property investment purchase.

Apparently it is in aid of making it easier for Australians to purchase their first home.

What?! Where is the data to drive that policy decision? And how could it be pushed through so quietly and quickly, without proper and due consideration?

Here is some data that has been put forward that is meaningful:

• About 1% of total housing mortgages are held by SMSFs;

  
  

• Less than 0.5% of new residential borrowing is by SMSFs;

  
  

• Around 1 in 10 SMSFs have what is known as a limited recourse borrowing arrangement (LRBA).

Do the Greens truly believe that installing this prohibition will benefit the first home housing policy?

There seems to be this blinker approach currently taken with regard to the rental housing market. Plenty of Australians need to rent housing. It could be for one of the following reasons and many more:

• Moving out of your family home for the first time, with a partner or friends;

  
  

• Marriage or relationship breakdown, where co-habitation ends;

  
  

• Closer to an hospital or treatment clinic due to illness;

  
  

• By sheer choice;

  
  

• Not being in the category of people having the financial capacity to purchase, even if there is supply.

Investors underpin the rental market. Those investors include SMSFs. The rental market remains in dire straits due to supply and affordability.

This seems to again target aspiring Australians. Australians who genuinely want to get ahead and properly fund their retirement. Not the very wealthy or mega rich. Those trying to be astute and invest their savings wisely or cleverly, with the assistance of lending.

Unfortunately, this deal is going to be passed in the Senate imminently, unless there is a drastic change.

It’s a disappointing shame.