Super Reforms: What SMSF Investors Need to Know
- WT Capital
- 1 day ago
- 3 min read
The $3 million cap may be just the beginning — but SMSF borrowing is safe for now.
Recent superannuation reforms introduced by the Albanese government have already set the tone for a shift in how Canberra views super — not just as a retirement savings vehicle, but as a potential source of tax revenue and redistribution.
While the upcoming additional tax on super balances over $3 million has garnered significant attention, new commentary from Treasurer Jim Chalmers confirms that further reforms are under consideration. However, there’s one key area that investors can breathe easy on — at least for now.
“We have no intention to ban borrowing in self-managed super funds.” Treasurer Jim Chalmers, May 2025
Let’s break down what’s changed, what might still be coming, and how SMSF trustees should respond.
✅ What Has Already Changed?
Effective 1 July 2025, individuals with super balances exceeding $3 million will pay an additional 15% tax on earnings associated with the excess — bringing the total tax on that portion to 30%.
Importantly, this new tax:
Applies to unrealised gains, not just income or realised capital gains
Affects SMSFs with illiquid assets such as direct property or private holdings, which must now be valued annually for tax purposes
The Impact on Property-Rich SMSFs
If your SMSF owns property — particularly in high-growth areas — this change means paper gains will now increase your tax bill, even if you don’t sell the asset. This creates a new layer of planning complexity for trustees and investors.
🔍 What Reforms Are on the Horizon?
While the borrowing ban has been ruled out, the Treasurer’s language is clear: more changes are likely.
“This change is not the end of the conversation — it’s the beginning.” — Treasurer Jim Chalmers
Potential Future Reforms Being Floated:
Lowering the high-balance threshold (e.g. reducing it from $3 million to $2 million)
Tightening contribution caps, both concessional and non-concessional
Limiting pension phase tax advantages for large balances or inherited pensions
Imposing stricter valuation and liquidity standards on SMSF-held assets
Even without further legislative change, this rhetoric signals a cultural shift: large SMSF balances are now seen as a policy concern, not just a planning opportunity.
🧠 Why Borrowing in SMSFs Was Under Scrutiny
Borrowing through Self Managed Super Funds — typically via Limited Recourse Borrowing Arrangements (LRBAs) — has faced criticism in recent years due to:
Concerns over leverage risks in retirement savings
The growing popularity of property investment via SMSFs
Fears of property market distortion or systemic risk
Yet, Labor has made clear that a ban on SMSF borrowing is not on the agenda, despite earlier speculation.
“It’s not something we’re considering… but we’re keeping a close eye on the sector.” — Treasury source
This clarity removes a major source of uncertainty for investors using leverage within their super to acquire property.
🧩 What This Means for SMSF Trustees
Even if you’re not impacted by the $3 million threshold yet, you should still prepare for a shifting regulatory environment.
Key Takeaways:
Borrowing is still allowed, but expect greater scrutiny on compliance, asset valuations, and fund liquidity
Unrealised gains are now taxable above the $3 million threshold — review your valuation policies
More reforms are likely, so plan with flexibility in mind
🔧 Five Strategic Moves SMSF Members Should Consider
Strategy | Why It Matters |
Review asset valuations annually | Unrealised capital growth now has tax implications |
Model future balance projections | Avoid creeping over the $3 million cap unknowingly |
Consider income diversification | Smooth volatility and reduce over-reliance on capital gains |
Use the pension phase wisely | Transition to 0% tax environment where eligible |
Optimise contribution timing | Bring forward caps while they remain generous |
🧭 Final Word
Labor’s reforms reinforce a new paradigm: SMSFs are no longer off-limits for policy tightening.
While borrowing remains permitted — and, in many cases, strategic — trustees must remain vigilant. With a focus on "equity" and "sustainability", the government is likely to introduce more constraints that disproportionately affect larger funds, property-heavy portfolios, or those reliant on aggressive tax planning.
But for those who stay informed and agile, the Self Managed Super Fund (SMSF) still offers unmatched control, tax efficiency, and legacy planning advantages.
Need Help Navigating the Changes?
At WT Capital, we specialise in helping Australians invest in property through their SMSF — with expert guidance on borrowing, compliance, tax strategy and asset selection.
From reviewing your property valuations to modelling future fund exposure under new rules, our specialists can help you stay ahead of reform risk.
