Industry voices agree there’s a problem to solve, but throwing the baby out with the bathwater ain’t it
Life is rarely ever black and white, and the debate that has erupted over the government’s decision to ban SMSF lending for residential properties proved just that.
Labor’s shock announcement of a ban on SMSFs from using limited recourse borrowing arrangements (LRBAs) to purchase residential property landed like a grenade in the broking industry.
Announced on Tuesday after a deal struck with the Greens to pass Budget tax legislation through the Senate, the prospective ban – with a roughly 45-day transition window – has left brokers blindsided and in-pipeline SMSF clients scrambling.
But underneath the outrage lies a genuine problem: SMSF lending is not risk free, and there are real concerns of borrowers being pushed into unsuitable lending strategies that put their retirement savings at risk.
There is a well-known concern of so-called ‘spruikers’ on social media touting the SMSF structure as an easy path to wealth creation; often, the ‘spruiker’ tiptoes very closely on the line of providing unlicensed finance advice.
Troy Phillips, managing partner at FirstPoint Mortgage Brokers, is no supporter of the ban – he said it had "raised more questions than it's answered" – but he acknowledged the conduct that put it on the regulatory agenda.
"I've also seen property spruikers use SMSF lending to push poor-quality property and questionable strategies onto people who probably shouldn't have been there in the first place," he said.
But he has also seen SMSF lending work exceptionally well. Phillips recalled a client who tipped $500,000 into an SMSF 12 years ago, borrowed another $700,000, bought well, held the asset and ultimately retired with more than $3 million in super.
“That's exactly what the system is supposed to help people achieve,” said Phillips. “If there's a problem to solve, I'd rather see better advice standards, education and enforcement around spruikers than a blanket ban.”
Kaya Geale (pictured, left), director at Fortify Loans, agreed the underlying problem was real. "Some property spruikers have pushed people into an overpriced asset inside their super that was never right for them, and putting most of your super into one single property is risky, no argument there,” he said.
The regulatory history supports the concern. The 2014 Murray Financial System Inquiry recommended tightening SMSF borrowing rules, and the Council of Financial Regulators raised the same concerns in both 2019 and 2022. The argument that something needed to change is not without foundation. Acknowledging a problem, however, is not the same as accepting the solution. And on that point, brokers are unified.
A few bad eggs
"The bad behaviours of a few operators (are) not a reason to ban the tool for everyone," Geale said. "I'm a broker, so I am licensed and legally have to act in the clients' best interests. Someone selling you a property to put in your super often isn't held to the same standard."
The conduct risk in SMSF lending has never sat primarily with licensed brokers, said Geale. It sat with unlicensed spruikers operating outside the Australian Financial Services Licence regime – people with far lighter accountability obligations than the brokers now penalised by the ban.
Beau Flanders, director at Zion Financial, put it plainly: "Banning the tool punishes the professionals and families doing it properly while the dodgy operators just move to the next structure. The fix is to regulate the conduct, not strip a legitimate option."
Blake Buchanan, managing partner at SFG, said there have “absolutely been cases where property spruikers have sold SMSFs a dream of 'buy one property and retire wealthy', without properly explaining concentration risk, liquidity issues, vacancy risk, interest rate risk or the complexity of LRBAs”.
But do those instances justify banning a legitimate strategy for everyone? “My view is that they do not,” said Buchanan.
“There are bad apples in every industry,” added Son Pham (pictured, right), managing director at Rethink Financing. “You can’t blanket it just because of some bad operators. Rules, regulation, policies are what needs to be looked at to combat these spruikers… Why close off another incentive for Australians to invest and get ahead?”
What a targeted fix could have looked like
Buchanan outlined alternatives: stronger educational requirements for trustees before entering an LRBA; mandatory suitability assessments; tighter Australian Securities and Investments Commission (ASIC) enforcement against spruikers and unlicensed advisers; loan-to-value ratio restrictions; requirements for independent advice; and additional liquidity requirements.
"Those measures address the actual problem while preserving choice," he said. "The policy debate should be about improving trustee outcomes and protecting consumers from poor advice. It should not be about removing investment choice from people who have demonstrated they are willing to take responsibility for their own retirement planning."
Geale added: "Shut down the referral chains where everyone gets a cut except the buyer, and put sensible limits on lending. This would target the people actually doing the harm."
Buchanan raised a broader point. Removing LRBAs does not remove investment risk from superannuation – it pushes more retirement savings into large institutional funds. "Australians are still exposed to market risk, property risk and economic risk, but with less direct control over how their money is invested," he said.
Not just a rich kids club
Joseph Daoud of It’s Simple Finance was blunt about the broader failings of the Budget that spawned the ban.
"The budget was not well written, not well explained and not well received," he said. "We may have picked up a small win on the small business front, but it was not significant enough – and this SMSF decision was another broken promise, a compromise made to get a deeply flawed budget through the Senate."
Daoud was particularly scathing of the Greens' framing that the ban would help renters and take property out of the hands of the wealthy (“The changes we have secured means that there will be fewer wealthy property investors turning up to auctions and outbidding renters who want to buy their first home,” said Greens economic justice spokesperson Senator Nick McKim.), noting that the data does not support that narrative.
As of March 2026, those aged 35-44 make up 38.9% of new SMSF members – the largest single cohort – and 68% of new members are under 50, per official government data. The most common income range for new members is $100,000-$150,000. Or, in Daoud’s words: “Mid-career professionals seeking more control over retirement savings that are otherwise locked away for decades.”
"This is not the wealthy end of town," Daoud added. "These are everyday Australians trying to get ahead."
His frustration extends to the collateral damage. “Whilst it has been blasted to an audience that property spruikers use this method to sell poor properties, we are upset that they decided to punish all SMSF residential asset borrowers and not change the methodology on how to acquire one of these properties.
“There are many ethical and high-performing broker groups that specialise in SMSF, and one of their products has just been ripped away from them.”
