Divorced women with insufficient bank savings are tipped to be the biggest losers from Labor’s move to ban self-managed super funds from borrowing to buy an investment property.

Peter Burgess, the chief executive of the SMSF Association, said the Federal Government’s deal with the Greens would stop the likes of divorcees from using their retirement savings for a mortgage deposit to purchase a house or unit to rent out.

“They may not have that capital outside of superannuation, but they do have it in their superannuation fund,” he told The Nightly.

“It enabled superannuation members to access the investment property market like they may not have been otherwise.”

Houses have also proven to be strong capital investments over many decades and buying it through a self-managed super fund can boost retirement savings if a property was used for passive rental income or later sold.

The rules don’t allow self-managed super funds to buy residential properties for an individual to live in as an owner-occupier.

“People that have had some changes in their circumstances — divorces and other things — have found themselves behind where they want to be from a retirement savings point of view,” Mr Burgess said.

“These structures have been used to help them catch up and in some cases get ahead.”

Under a deal with the Greens in the Senate, Labor will reverse a 2007 law change enabling self-managed super funds to borrow to buy residential property, which the Coalition is opposing.

A 45-day transition period will apply from when Governor-General Sam Mostyn signs the Federal Government’s amended Budget tax bill.

This will allow any contractual exchanges to be settled before the ban takes effect.

Former Commonwealth Bank chief executive David Murray’s 2014 Financial System Inquiry recommended stopping self-managed super funds from buying residential property on financial stability grounds.

The Council of Financial Regulators, whose members include the Reserve Bank of Australia, Treasury and the Australian Prudential Regulation Authority, also raised concerns in 2019 and 2022.

But Mr Burgess argued aggressive sales tactics, to entice self-managed super funds to buy residential properties, was the main issue rather than financial stability.

“We actually think the Government and the Greens are focusing on the wrong issue,” he said.

“The issue is not the rules which allow self-managed super funds to borrow to invest in residential property, it’s the aggressive sales tactics being used by some to encourage and entice people to invest in these type of borrowing arrangements when they may not be right for them.”

Residential property investments in self-managed super funds were worth $62.7 billion in March 2026, a Ray White analysis of Australia Taxation Office data showed.

This made up 5.9 per cent of the $1 trillion in self-managed super fund assets.

Commercial property holdings, which will still be allowed under the changes, were worth double the value of residential property in SMSF funds at $120.1b.

Existing rules, being phased out, meant a self-managed super fund could buy a residential property without the risk of a bank being able to repossess other assets in the fund should the individual borrower default on a mortgage taken out by the SMSF.

“The ‘limited recourse’ part means that if the fund defaults, the lender can only claim the specific property used as security. Other assets held in the SMSF are protected,” Ray White economist Atom Go Tian said.

“This structure allowed trustees to purchase investment property using their superannuation balance as a foundation, with borrowing to bridge the gap, similar in concept to a standard mortgage, but inside the superannuation environment.”

The Greens, who hold the balance of power in the Senate, agreed to keep grandfathering provisions for investment properties exchanged before Budget night on May 12 if self-managed super funds were banned from buying residential investment properties.

This meant existing investors would continue to be able to negatively gear an unlimited number of rental properties, as bans on the tax breaks for existing homes came into effect from July 2027.

The 50 per cent capital gains tax discount on investment properties is being replaced with a minimum 30 per cent tax on indexed gains from that time.

But self-managed super funds will still have a 33.3 per cent CGT discount as a 15 per cent tax is applied to earnings before the retirement phase, meaning an effective tax rate of 10 per cent.

This would have made residential property more lucrative for SMSFs.

“That’s why people are saying the CGT rules are now more favourable for super funds compared to other types of investments,” Mr Burgess said.

“That’s why they’re worried about property spruikers and others moving in and convincing people that they should roll over their money into a self-managed super fund and then borrow and buy an investment property.”