- Mid-August is emerging as the deadline for SMSF residential property purchases to be completed
- After that time, SMSFs will no longer be permitted to borrow funds to buy homes
- SMSFs with a signed sale contract have the best chance of completing a transaction in the 45-day transition period
Mid-August is emerging as the working deadline for self-managed superannuation funds (SMSFs) to finalise loan contracts to purchase residential property.
After that time, SMSFs will no longer be permitted to borrow funds to buy residential property, following a government deal with the Greens last week to get its federal budget tax changes through Parliament.
The budget bill, with the late SMSF changes, should officially pass into legislation later this week, triggering the start of a 45-day period allowing existing residential sale and loan contracts to be completed.
The changes will leave the sector scrambling to finalise transactions with some expected to miss the cut-off depending on how far their arrangements have progressed.
SMSF advisors say established SMSFs that already had a signed contract to purchase a home have the best chance of completing a sale before the expiry date.
Greens 'close the loophole'
SMSFs can borrow to purchase property under so-called 'limited recourse borrowing arrangements' (LRBA) where lenders can only repossess the asset purchased and not other fund investments if there's a default on the loan.
SMSF loans are not typically offered by the major banks owing to the complexities of setting them up and the higher risk associated with them.
Such borrowing arrangements have long been in the sights of the Greens who regarded SMSFs being able to buy homes as an unfair "loophole" for the wealthy that helped inflate housing prices.
The new borrowing ban will be grandfathered so will not affect existing SMSF loan arrangements or refinancing.
SMSFs will still be allowed to buy residential properties but they must be purchased outright, without finance.
SMSF loans for commercial properties also remain unaffected.
See also: Will commercial property be the new go-to for investors?
How many SMSFs have home loans?
When the deal to ban SMSF borrowing was announced last week, the government said SMSF lending accounted for "less than 1% of total residential property borrowing" - or around 4,000 loans - each year.
According to the most recent SMSF statistics from the Australian Taxation Office, 11% of SMSFs had an LRBA in the 2023-24 financial years.
They were most common for funds with a balance of between $500,000 and $1 million.
Sections of the property industry had called for a carve-out permitting SMSFs to invest in new housing even if borrowing for existing homes was off limits.
But this was not considered in amendments to the budget bill which was passed by the Senate on Thursday and forwarded for official assent on Friday.
Opposition housing spokesperson Andrew Bragg said it was difficult to see why Labor had made a distinction between new and existing homes with its original housing tax changes, but not for SMSFs where borrowing for all homes will be banned.
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| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Extra Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
6.89% p.a. | 6.91% p.a. | $3,290 | Principal & Interest | Variable | $0 | $230 | 60% |
| Promoted | Disclosure | ||||||||||
7.14% p.a. | 7.19% p.a. | $3,374 | Principal & Interest | Variable | $0 | $220 | 70% | Disclosure | ||||||||||||
7.24% p.a. | 7.26% p.a. | $3,407 | Principal & Interest | Variable | $0 | $230 | 80% | Disclosure |
