When we wrote recently that the SMSF property borrowing ban may not be the end of the story, the push for a new-build exemption was already underway. Now some fresh numbers have landed, and they make that debate even more interesting.
First, an important distinction. SMSFs have not been banned from owning residential property. The change specifically removes the ability of super funds to enter into new limited recourse borrowing arrangements (LRBAs) to acquire residential property from 10 August 2026. Existing SMSF borrowing arrangements are not affected, and transitional arrangements were provided for transactions already underway when the change was introduced.
SMSFs are generally prohibited from borrowing in the first place. An LRBA was an exception that allowed an SMSF to borrow to acquire an eligible asset, with the property held through a separate holding trust and the lender’s recourse generally limited to that asset if the loan went into default. The new restriction targets that borrowing exception for residential property — it does not prevent an SMSF from purchasing residential property outright with available fund money, subject of course to the usual superannuation rules.
The numbers are bigger than we thought
The new Class 2026 Annual Benchmark Report found 3,672 new residential property LRBAs were established in FY25, up 46.8% from FY23. Based on its data, Class estimates around 11,500 new residential property LRBAs may have been established across the SMSF sector that year, suggesting residential SMSF borrowing was more active than earlier estimates indicated.
That matters because the restriction applies to borrowing for residential property generally, rather than only borrowing to compete for existing homes. It therefore also captures new residential property, which is where the pressure for a rethink is growing.
The Housing Industry Association estimates the restriction could reduce detached home commencements by around 3.5% to 5%, or roughly 4,000 to 5,500 homes in a year. HIA says its survey also identified 3,613 signed new-home contracts involving SMSF borrowing that had not commenced construction when the policy was announced, with builders expecting around 2,415 of those contracts to be cancelled.
These are industry estimates, not Government findings, but they raise a reasonable question about the unintended impact on housing supply. HIA has also called for a comprehensive cost-benefit analysis, saying no such analysis or Treasury modelling of the housing-supply impact was released before the change.
Could new builds come back?
The SMSF Association is continuing to push for a targeted exemption for new residential property. The idea is relatively simple: retain the restriction on new SMSF borrowing to acquire existing residential property, but restore the LRBA exception where the investment involves genuinely new residential property that adds to Australia’s housing stock.
There is no Government announcement that this will happen, and the restriction that commenced on 10 August remains in place. But with new data suggesting SMSF residential borrowing was bigger than previously estimated, and housing groups warning about the potential impact on new construction, there is now more substance behind the argument for a rethink.
When we first wrote that the SMSF property ban might not be the end of the story, we didn’t expect the next chapter quite this quickly.
This information is general in nature and does not take into account your personal objectives, financial situation or needs. Freedom Financial Solutions is not licensed to provide financial product advice under the Corporations Act. You should consider obtaining advice from an appropriately licensed financial adviser before making a decision about a financial product.
Sources: Class 2026 Annual Benchmark Report; SMSF Association; Housing Industry Association; Australian Government.
