Industry bodies and tax academics clashed again as SMSF property incentives and a shrinking advice workforce came under the spotlight
The second and final day of the Senate Economics Legislation Committee's inquiry into Labor's capital gains tax (CGT) and negative gearing reforms delivered fresh warnings about unintended consequences.
The Financial Advice Association Australia (FAAA) raised the alarm over SMSF property risks, unlicensed operators, and an advice workforce at breaking point, while housing and real estate groups continued to press the case that the reforms would deepen Australia's supply crisis rather than solve it.
The SMSF tax incentive nobody planned for
Perhaps the most striking testimony of the day came from the FAAA, which warned that Labor's new tax settings have created an unintended incentive for property investors to hold established residential property inside a self-managed superannuation fund rather than in their personal name – making SMSFs a more tax-effective vehicle under the proposed regime.
Andrea Forbes, representing the FAAA at the inquiry, told the committee this consequence was unintended but carried serious conduct risks.
While she conceded that the consequences of the changes are unintentional, “we are concerned because there has been misconduct in that area with consumers being pulled into these schemes by property brokers, in particular, people who aren't licensed, people who may not have the best interests of that consumer at heart”, Forbes said.
"These schemes can be very high-risk, so if you are investing your superannuation in a single property and you're highly geared, then it doesn't take much to go wrong for that strategy to fall over,” added Forbes.
The SMSF risk had surfaced on day one, when Melbourne Law School's Kathryn James flagged the emerging loophole to the committee. The FAAA's testimony on day two added a conduct dimension – pointing specifically to unlicensed property operators as a vector for consumer harm if the incentive is not addressed before the legislation passes.
An advice workforce stretched thin
The FAAA's testimony also shone a light on a broader structural problem that the reforms are accelerating: a critical shortage of licensed financial advisers at the precise moment when consumer demand for advice has surged.
Forbes told the committee that adviser numbers have roughly halved since 2019 to just over 15,100 today – a figure corroborated by FAAA submissions to Jobs and Skills Australia, which placed the decline at approximately 48% from a peak of around 28,900 at the end of 2018. Approximately 700 Australians are retiring each day, Forbes said, creating demand the current workforce simply cannot meet.
"We're concerned that unadvised Australians will be more vulnerable to scams, fraud, and unlicensed influences as they seek to navigate these very wide-ranging tax reforms," she said. "Members are dealing with consumers literally every day about the changes and the potential implications for them, everything from remodelling their retirement planning to talking about their estate planning, whether that should be delayed, and so on."
Supply fears and the rental market
The property and housing sectors continued to press their case that the reforms would worsen rental affordability by discouraging private investment in new housing stock.
Jacob Caine, president of the Real Estate Institute of Australia (REIA), told the committee that the housing crisis was fundamentally a supply crisis – and that the reforms risked making it worse.
"Housing affordability will not be solved by reshaping tax settings in a way that reduces rental investment, adds uncertainty, and risks slowing the delivery of new homes," Caine said. "These reforms do not build more homes; they disrupt and damage investor behaviour in a market already facing acute supply shortages."
Andrew Mihno, head of policy and government relations at the Urban Development Institute of Australia (UDIA), also warned that the tax changes should be reviewed to ensure they do not delay investment into new housing stock – a delay that could place upward pressure on rents at a time when vacancy rates are already critically tight.
Academics back fairness
On the other side of the debate, tax academics reaffirmed their support for the broad direction of the reforms while acknowledging the compliance burden they carry.
Miranda Stewart, Professor at Melbourne University Law School, said the changes "do improve fairness and equity in the system, which has been a long-standing concern”, and commended the government for acting, despite the significant compliance transition.
Australian National University Associate Professor Sonali Walpola backed that view, pointing to the scale of the existing tax expenditure – nearly $22 billion in 2025–26 – and its disproportionate benefit to high-income earners.
Stewart also used the hearings to challenge the claim from some start-up founders that the reforms would push businesses offshore. The critical question, she argued, was not the mobility of capital but the mobility of people.
"Our individual founder, who wants low tax on capital gain, who wants to be taxed differently from workers, they have to go and live in Dubai, live in the US in order to achieve that," she said. "The empirical evidence shows that some people move in response to tax changes, but the majority do not."
Accountants and the compliance bill
Accounting bodies pushed back hard on the drafting of the legislation, describing the consultation process as inadequate and the compliance costs as grossly underestimated.
Damian Ogden, executive for advocacy at Chartered Accountants ANZ, said the bill introduced unnecessary complexity through new classifications of gains and losses, valuation requirements as of 1 July 2027, and more demanding record-keeping obligations. Chartered Accountants ANZ called for three specific amendments, including changes to the ordering of capital loss usage and expanded access to indexation.
Tony Greco, senior tax adviser at the Institute of Public Accountants (IPA), said the CGT changes carried "a black mark" against the three core principles of sound tax law – fairness, efficiency, and simplicity – and that Treasury had grossly underestimated the cost of compliance, which it put at $88 million. Valuations for illiquid assets alone would far exceed that figure, Greco told the committee.
Political sparring session
Employment Minister Amanda Rishworth and shadow treasurer Tim Wilson clashed on air over the validity of the two-day inquiry process, with Wilson cutting in as Rishworth defended the timeline.
"Two days is not a timeframe to be able to make submissions," Wilson said, to which Rishworth responded that the process had been open to all submissions.
The Senate committee is due to report by 22 June 2026.
