Will SMSF Borrowing Survive the Next Parliament? Investor FAQ

As Australia approaches a new political cycle, self-managed super fund (SMSF) investors are once again bracing for potential reform—this time, in the form of proposed restrictions on Limited Recourse Borrowing Arrangements (LRBAs).

A recent article in The Australian suggests that LRBAs—commonly used by SMSFs to invest in residential property—could be among the first casualties of the government’s renewed focus on retirement system reform.

At WT Capital, we believe it's critical for investors to understand what’s on the table, what’s likely (or not), and what this could mean for property investment inside super.

What’s Being Proposed?

The key issue centres around Labor’s long-standing concern that borrowing inside super increases systemic risk and undermines the preservation purpose of superannuation.

Treasury and the Council of Financial Regulators have previously flagged LRBAs as a policy concern. While no legislation has yet been introduced, some within the government are reportedly revisiting earlier Productivity Commission recommendations to phase out borrowing inside super altogether.

Why Now?

The renewed political interest in LRBAs comes amid:

• A push to boost housing affordability, with policymakers wary of SMSFs adding demand-side pressure in key markets.

• A broader effort to simplify and de-risk the super system, ensuring it supports long-term retirement income.

• Calls from some economists to tighten tax concessions linked to leveraged SMSF property strategies.
  

However, it’s worth noting that similar concerns have been raised since as early as 2014, without meaningful legislative follow-through. The regulatory inertia has historically been due to:

• The relatively small proportion of total SMSFs using leverage (under 10% of all SMSFs).

• The robust controls and arm’s-length rules governing these transactions.

• Strong industry pushback and lobbying from financial services bodies.
  

What It Means for Investors

If Labor chooses to act on these recommendations, new LRBAs could be curtailed or phased out, though existing arrangements are likely to be grandfathered.

This raises two key points for current and prospective investors:

1. There may be a window of opportunity

If you’ve been considering using your super to invest in property, doing so before any potential legislative change may provide access to strategies that could soon be off the table. At WT Capital, we help clients establish compliant SMSFs and acquire investment property through their fund—with borrowing structures that meet current ATO guidelines.

2. Sound strategy matters more than ever

While LRBAs can be a powerful tool, they aren’t suitable for every fund. A properly structured SMSF property purchase should focus on:

• Long-term capital growth

• Sufficient rental yield to support loan repayments

• Clear exit strategies for retirement phase

Our advisors provide tailored guidance to ensure your SMSF investment strategy remains tax-efficient, sustainable, and compliant—regardless of shifting legislative winds.

The WT Capital Take

Despite the headlines, no legislative change is yet in motion. Political discussion around SMSFs and borrowing is not new, and any proposed changes would likely involve consultation and transition periods.

That said, investors should stay informed and act decisively. As always, we advocate for smart, compliant, and forward-looking super strategies that maximise long-term retirement outcomes.

If you're considering an SMSF property purchase, now is the time to review your options—before potential reforms tighten the rules.

👉 Book a free consultation today to explore how your super could help fund your next investment property: