Industry claims Labor’s ‘skulduggery’ ban will hurt everyday Aussies

The federal government has been accused of targeting the same people it has claimed to help under a last-minute amendment pencilled into its controversial tax bill.

Labor and the Greens reached a deal to pass the tax bill with the inclusion of a ban on self-managed super funds (SMSFs) from entering new future limited recourse borrowing arrangements (LRBAs) for residential homes.

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Bell Row advisory director Matthew Kidd called it the worst legislative change he had seen in his 25-year career, saying mums and dads were the ones who largely used the arrangements as opposed to wealthy property investors.

“There’s this notion that we think it’s for the rich when that couldn’t be further from the truth,” he said.

“It is middle-class Australia, all they want to do is get ahead and have something more to retire on, and get something, have something more to leave their kids.”

An LRBA is a loan that allows those with an SMSF to borrow to invest in a home.

It protects their other assets as the lender can only repossess the home if the fund defaults and cannot go after other assets.

The Greens had successfully sought to ban LRBAs and close a so-called loophole that allows investors to buy properties.

Existing arrangements are not impacted and there is a 45-day transitional period for arrangements currently midstream.

The tax bill, which includes the ban, was passed into law on Thursday after the Greens voted with Labor.

A joint statement by eight non-bank lenders – Pepper Money, Liberty Financial, Resimac, Firstmac, Bluestone, Thinktank, ColCap and RedZed – also argued that the change will hurt working Australians.

“The industry says the measure is rushed, blunt, and inconsistent with the government’s stated objectives to support housing affordability and promote retirement savings,” the statement read.

Kidd said he had already seen confusion and anxiety from his clients, some of which were reconsidering buying a property due to the lack of detail around the ban.

“People don’t know what’s going on, everyone’s heads are spinning,” he said.

Kidd said the sector was blindsided and not given the explanation or time to understand the change.

He also questioned how the LRBA could be a loophole if it operates within the law.

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“When they make a decision like this in such a hurried, skulduggery, behind-the-curtains way, people need to be angry, people need to be distrustful,” he said.

“If they weren’t as trustful before, they are now.”

The ban will bring SMSFs in line with other superannuation funds, which are generally not allowed to borrow money to invest.

Prime Minister Anthony Albanese, Treasurer Jim Chalmers, Finance Minister Katy Gallagher and Health Minister Mark Butler said in a joint statement that previous inquiries have raised risks for superannuation investors and limiting new LRBA arrangements will help protect people’s savings.

LRBAs make up less than 1 per cent of all residential borrowing and less than 0.5 per cent of borrowing for new homes.

The Australian Tax Office estimates there are 663,867 SMSFs worth a combined $1.06 trillion.