SMSF borrowing changes draw mixed industry response

Some tax professionals have described the announcement as another "broken promise" from the government, while others have said the changes will have little impact on their client base.

Naz Randeria, managing director of Reliance Auditing Services, said she had no confidence in a government that treats retirement savings, the national economy and long-term policy "as bargaining chips".

Randeria said the announcement on SMSF borrowing was "deeply concerning" and that policy affecting Australians' retirement security should be evidence-based, measured, and in the national interest, not shaped by political deals.

"At a time when the KPMG matter is reminding our profession how critical trust, governance and accountability are, the same standard should apply to government decision-making," Randeria said.

"Australians deserve leadership that protects confidence in our retirement system, our economy and our institutions."

David Busoli, principal of SMSF Alliance, said the deal with the Greens reflected the Greens Party's "opposition to aspiration" and labelled it another broken promise from the Labor government.

"The Greens have been implacably opposed to SMSFs generally and limited recourse borrowing in particular, even though the use of LRBAs has been, in the main, appropriate and a legitimate vehicle for superannuation members, including younger members, to save for their retirement," he said.

"Also, demonstrably, the effect on the availability of homes for new home buyers has been negligible."

Smarter SMSF chief executive Aaron Dunn said he had no issue with prohibiting the use of borrowing on residential property within SMSFs, but said he was pleased to see the government would retain the use of LRBAs for commercial property.

"A blanket ban would have been totally reactive, rather than trying to find a workable solution to the Greens' issue, which is purely residential housing. LRBAs are utilised extensively within small businesses, with loan-to-value ratios lower than for residential property," Dunn said.

Wattle Partners director Drew Meredith said there was substantial noise surrounding the announcement, but noted that the ban would only apply to new borrowings for residential property, with existing arrangements safe and borrowing arrangements for commercial property untouched.

"It affects far fewer people than the headlines suggest: only about one in ten SMSFs borrows at all, and that lending is roughly three per cent of all SMSF assets," Meredith said.

"For our clients in retirement it changes little, because borrowing to buy property has never belonged in a retirement plan."