The SMSF Association has reiterated its concern over the federal government’s decision announced yesterday to ban the use of limited recourse borrowing arrangements (LRBA) by funds to acquire residential property.
In particular, the main representative body for the sector criticised both the method by which the decision was made and the process involved in reaching it.
“This is a significant change to the SMSF investment landscape being progressed through a late-stage amendment, without consultation or an evidence-based review process,” the association stated in a member update today.
It also took the opportunity to acknowledge the value LRBAs have provided to SMSF members to date.
“LRBAs have assisted many Australians to achieve better retirement outcomes in a controlled and highly regulated environment for almost two decades,” it noted.
“They should not be constrained simply to secure passage of the government’s federal budget tax measures.”
The association also revealed more details as to the implementation and operation of the amended policy.
“The proposed start date is the 45th day after the [amended Treasury Laws Amendment (Tax Reform No 1) Bill 2026] receives royal assent. Existing arrangements entered into before commencement will be grandfathered, as would refinancing arrangements that maintain or refinance pre-commencement borrowings,” it said.
Upon the announcement of the government’s new position, the professional body defended the use of LRBAs as a reasonable strategic instrument for SMSF trustees.
“LRBAs are a legitimate investment tool that, when used appropriately and under existing regulatory safeguards, allow individuals to invest in assets through their self-managed superannuation fund that they may not otherwise be able to do,” it explained.
It pointed out the gearing facilities are not the cause of any perceived problems associated with them.
“The problem is not the borrowing structure itself, but the conduct of those who aggressively market unsuitable property investments and make unrealistic claims about returns and retirement outcomes,” it noted.
Darin Tyson-Chan
Editor
Darin is the founder and publisher of Benchmark Media, an independent publishing house whose mastheads include financialobserver, selfmanagedsuper and smstrusteenews. He has been covering the financial services space for over a decade and in this time he has worked for a variety of trade publications. Darin has also written for the Money section published in The Sydney Morning Herald and The Age.
Articles by Darin