SMSF changes unlikely to deter those seeking greater control over superannuation

Recent changes to the rules around self-managed superannuation funds (SMSFs) have caused some controversy, but for those most likely to benefit from these structures, little has altered.

The Government's decision to restrict SMSFs from using Limited Recourse Borrowing Arrangements (LRBAs) to purchase residential property came into effect from August 10 this year.

The change was not flagged in advance and followed concerns about promoting SMSFs as a way for investors to navigate broader changes to negative gearing and capital gains tax.

While the changes has placed some limitations on SMSFs, the majority of people shouldn't be affected and SMSFs continue to offer a number of attractions.

Why establish an SMSF?

SMSFs have proven to be very popular since they were first introduced in 1999. The most recent Australian Taxation Office figures show more than 50,000 new SMSFs were established in the 2025-26 financial year, taking the total number of people covered by SMSFs to 1.24 million.

Notably, the number of SMSFs that were closed down during FY25/26 dropped significantly compared to previous year, with just 5011 wound down in FY25/26 compared to 19,298 in FY20/21, and has declined year on year.

Source: ATO

In the past five years, the total number of SMSFs has increased steady from 568,882 in June 2021 to 680,301 in June 2026, highlighting the ongoing popularity of SMSFs. In my view this popularity is unlikely to be derailed by the banning of LRBAs.

There are many reasons why someone might establish an SMSF, but it shouldn't be solely to borrow money to buy a residential investment property.

The first question I ask a client considering an SMSF is why do they want one?

It's important to understand why they want an SMSF and what they are hoping to achieve. That helps determine whether it is the right structure for them.

If I'm speaking with a client who already struggles with paperwork, part of my role is to make sure they understand that running an SMSF involves significant management and administration, and they need to be prepared to take on that responsibility.

Sometimes people like the idea of having greater control, but once they understand the complexity and compliance requirements involved, they recognise that an SMSF isn't the right structure for them - or at least not yet.

Property should not drive the decision 

There have been instances where people have said the main reason for setting up an SMSF was to invest in residential property, but residential property is a relatively illiquid asset and provides limited diversification from an investment perspective, so building an SMSF around it carries risks.

It's also important to remember that it is still possible to invest in business real property (i.e. commercial property) through an SMSF using borrowing, and also it is still possible to own a residential property outright in an SMSF. It is the borrowing to acquire residential property that has been banned.

One option is to purchase a property in partnership with another party, for example 50 per cent via the SMSF and 50 per cent either in your own name or with another individual or entity, such as a fixed unit trust or company. This might be a useful approach if there aren't enough capital within the SMSF to purchase a property outright. Instead, the property would be purchased via a fixed unit trust where the SMSF subscribes to a certain number of units and the individual then acquires the remaining units in their personal name. With the banning of LRBAs, it's possible this will become a more common approach.

Such arrangements would be perfectly valid, although it would be important to consider any tax implications from such an arrangement.

SMSFs remain relevant 

The key benefit of an SMSF is the ability to take greater control over superannuation investments.

An SMSF is most beneficial for people who want to manage their own investments and take responsibility for maintaining the fund. They also must be capable of following the rules governing how an SMSF operates.

This approach can suit people who enjoy investing, value the responsibility and control, and have a clear idea of what they want to achieve, and who can maintain and follow an investment strategy.

They also need to be aware of and comfortable with the compliance requirements and costs involved, including fees for external audits, tax returns and financial statements, insurance and the like.

I generally don't suggest there is a minimum amount required before establishing an SMSF, but it is important to consider these costs and fees involved and compare them with those of an external super fund.

We continue to see strong interest from clients in SMSFs, with recent changes to the rules around trusts also making them a potentially more attractive option.

Those who own listed assets and/or business real property in a family trust could find there are tax benefits from transferring shares to an SMSF - particularly if the rules change again in the future, which seems possible.