LRBA ban needed comprehensive analysis, greater consultation

“While it’s a small part of the broader lending market, for working Australians with an SMSF, it has a really important role in their retirement savings strategy, Boyle said.

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

“Preventing the use of modest borrowing for residential property will disadvantage many Australians and limit their ability to maintain a diversified portfolio, particularly in times of global and market uncertainty,” he added.

Thinktank chief executive Jonathan Street noted that diversification is a core principle of prudent retirement planning; however, he said the changes make it difficult for SMSF trustees to balance a mix of assets, as other super funds can.

“For many SMSF trustees, residential property is not speculative – it is central to how they manage risk and plan for the long-term,” Street said.

“The premise that SMSF residential property borrowers are wealthy is far from the truth. Our portfolio reflects a broad range of Australians, many using relatively modest SMSF balances as a pathway to a form of home ownership,” said Pete Lirantzis, chief executive of Resimac.

Australian Finance Industry Association chief executive officer Diane Tate noted that asset limitations already apply to SMSFs, with these arrangements mostly used by Australians who seek to sensibly diversify their retirement savings.

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

In addition, Mortgage and Finance Association of Australia executive of policy, Naveen Ahluwalia, emphasised the crucial role SMSFs play in housing investment. 

“Restricting access to lending risks becoming another disincentive for Australians willing to invest in residential property,” Ahluwalia said.

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

Tate said this signals a lack of consultation, stressing the importance of technical amendments to ensure an orderly transition and that existing borrowers are not disadvantaged.

Previously, accountants have warned that these changes would crush trust in the nation’s retirement system, with some echoing the budget refrain of broken promises, others saying that the government is using a genuine vehicle for retirement savings as a bargaining chip, in a policy that is not evidence-based or in the public interest, but highly political.