SMSF property borrowing ban faces pushback over new homes
Proposed restrictions on self-managed superannuation funds investing in residential property are facing renewed opposition, with industry-commissioned modelling estimating the changes could affect demand for about 11,500 newly built homes each year.
The opposition is preparing to seek an amendment that would preserve limited recourse borrowing arrangements for SMSFs purchasing newly built properties, as remaining budget legislation moves through parliament.
The proposed approach would align with changes to negative gearing scheduled from July 1 next year, under which the concession would only be available for newly built properties purchased after the May 12 budget.
The debate comes as policymakers weigh changes to property investment against concerns about Australia’s housing supply and a weakening residential market.
Industry modelling points to new-build impact
According to figures presented during Senate estimates, about 8,700 SMSFs entered new limited recourse borrowing arrangements in 2023–24.
Treasury deputy secretary Katrina Di Marco said this was more than twice the government’s figure of 4,000 dwellings, although it remained below the industry estimate of 16,000 investment properties purchased by SMSFs last year.
Work commissioned by the SMSF industry calculated that approximately 11,500 of those properties were newly built.
Di Marco said 8,700 fewer dwellings would represent less than half a percentage point of new residential borrowing each year when measured against overall lending activity.
The proposed restrictions emerged after the Greens made their support for a tranche of budget legislation conditional on preventing SMSFs from using limited recourse borrowing arrangements for residential property.
Superannuation funds, including SMSFs, had otherwise been exempt from budget changes affecting investment taxation.
Opposition seeks exemption for newly built homes
Liberal senator and opposition housing spokesman Andrew Bragg challenged the proposed restriction during Senate estimates, arguing that SMSF investment in newly constructed homes should be retained.
Bragg said the Coalition would seek to amend the legislation defining new builds so SMSFs could continue investing in new homes.
The debate is occurring against a softer housing backdrop. Treasury secretary Jenny Wilkinson told the estimates hearing that dwelling prices had fallen 5.2 per cent from their March peak, although they remained almost 6 per cent above levels recorded a couple of years earlier.
Wilkinson attributed the decline in established house prices to cyclical pressures including high interest rates, heightened global uncertainty and weaker consumer sentiment.
She said the budget tax measures were expected to have only a modest effect on house prices and rents over the medium term, while shifting the ownership of housing stock towards owner-occupiers.
According to Wilkinson, further interest rate increases this year were expected to have the more significant effect.
The dispute over SMSF borrowing therefore comes as the government and opposition consider how investment rules may interact with housing supply, investor activity and financing conditions.
For property investors using SMSFs, the parliamentary debate is particularly relevant because the opposition’s proposed amendment would preserve a pathway for limited recourse borrowing where the investment involves newly constructed residential property. Whether that exemption becomes part of the final legislation will depend on the parliamentary process.
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