The future of self-managed superfund (SMSF) is in limbo after the government moved to reform how SMSF loans are used to buy property.
Earlier this month, the Labor party said it will prohibit self-managed super funds (SMSFs) from using limited recourse borrowing arrangements (LRBAs) to purchase residential property. The ban will apply to new loans only, with existing arrangements grandfathered and a 45-day transition period for investments already underway once the legislation receives Royal Assent.
The move was part of Labor's deal with the Greens to secure passage of the 2026 to 2027 federal budget through the Senate.
The government claimed the changes will improve housing affordability and tighten the rules around super, while critics say it will reduce investment choice, limit opportunities for brokers and borrowers, and disproportionately affect younger Australians and lower-income investors by removing one of the few avenues available to build wealth through property. Some lenders also warn the changes could stifle competition and make it harder for investors to diversify their portfolios.
The uncertainty prompted some lenders, including AMP Bank, to announce they would stop accepting new SMSF loan applications for residential property.
But less than 24 hours later, AMP reversed its decision following broker feedback and confirmed it would continue accepting applications.
In a note distributed by AMP, and as seen by Australian Broker, the lender said it had "reopened SMSF SuperEdge lending across all application types, including new purchases, pre-approvals and refinances."
The bank added: "we understand the importance of certainty for you and your customers, and will continue to monitor legislative developments closely, listen to feedback and keep you updated."
With the legislation now awaiting Royal Assent, the focus has shifted to the broader market: Will other lenders continue offering residential SMSF loans during the transition period? And what does the future hold for SMSF lending once the ban takes effect?
"The main flow-on effect will be on general confidence and sentiment, which has taken another hit, particularly in investment prone regions," Chris Hall, founder and managing director of Sydney-based Blue Crane Capital, told Australian Broker. "Off the back of lenders pulling back from trust lending, three interest rate rises (and lower borrowing capacities), tax reforms on capital gains tax (CGT) and negative gearing, plus inflationary pressures, it's really going to test the market over the next 12 - 24 months."
He added that if residential SMSF lending is phased out, "it will be difficult for brokers who have focused on SMSF residential as a core service offering. They will need to look for alternative deal source and flow, potentially looking to diversify into commercial. However, this comes with greater complexity and experience requirements.
"In terms of borrowers, SMSF resi clients will find it difficult to have an option to refinance down the track if lenders pull out completely," Hall continued. "Cashout in SMSF resi and commercial has not been allowed historically. So the only reason to refinance previously was rate or repayment change. This appears as though it's no longer an option moving forward."
The broker also noted that there's been a "big inflow of property investors looking to capitalise on purchasing a property within super and take advantage of the tax break before this is phased out. Many have already gone through the process and expense of engaging a financial advisor and accountant to set up an SMSF trust deed along with Bare Trust in readiness to acquire."
Non-bank lender Bluestone Home Loans said it plans to continue offering SMSF loans "within the current regulatory framework," according to Richard Chesworth, head of specialised distribution at Bluestone.
"There is a defined window for contracts to be executed. Where a contract is entered into within that timeframe, settlement beyond the 45-day period can still be accommodated, and that’s where we’ll continue to step in to assist," he said. "The priority is keeping things simple and predictable for brokers. We’ll provide clear guidance as details evolve, adapt where needed and make sure brokers have the confidence to keep deals moving."
Chesworth noted that there's been a "slight uptick" in SMSF applications and settlements since the reforms were announced. "As with any proposed regulatory change, there can be short-term shifts in activity as borrowers and brokers assess their options," he explained.
"Changes like this highlight just how adaptable brokers are," Chesworth continued. "When the landscape shifts, they find the next opportunity and move with it. There’s still plenty of scope, particularly in SMSF commercial property, alongside a broader mix of specialist lending solutions. We've always encouraged brokers to include SMSF as part of a well-rounded client offering. But it's not the whole strategy. Our role is to back brokers as they evolve. That means helping them diversify, explore new pathways and keep building momentum with confidence."
