FAAA urges SMSF property investment prohibitions

Mike Taylor

Managing Editor and Publisher

16 June 2026

The carve-out of superannuation from the Capital Gains Tax (CGT) regime and negative gearing changes creates the opportunity for unscrupulous property spruikers and operators to actively promote this tax advantage and persuade more Australians to invest property via SMSFs, says the Financial Advice Association of Australia (FAAA).

The FAAA is now urging the imposition of higher standards for starting an SMSF and a requirement to complete online trading as well as a prohibition on SMSFs investing in property development.

It said the CGT and negative gearing changes have created a substantial incentive for Australians who want to invest in (established) residential property to do so via an SMSF.

The FAAA has told the current Senate Economics Committee inquiry into the Government’s Budget tax changes bills that to point out that: “Since the announcement of these reforms, there has been an uplift in advertising on social media suggesting that SMSF property investment is the new big opportunity. This is on top of a recent material increase in the establishment of SMSFs”.

“While this strategy can be beneficial for consumers, it carries higher risks, including high rates of gearing, very low levels of diversification, illiquidity, and risks that the regular payments required to support the strategy might exceed the ability of the consumer to contribute to their super.

“The Government’s existing superannuation switching reforms do not address this particular risk. We believe further work is needed to identify targeted reforms that will reduce the risk of investors being directed into property investment that might not be in their best interests.

“To help address this, we recommend consideration of the following options:

• Higher standards for starting an SMSF, including enhanced warnings and a requirement to complete on-line training before individuals are cleared to set up an SMSF.
• Limitations on Limited Recourse Borrowing Arrangements (LRBAs).
• A prohibition on SMSFs investing in property development.
• Limitations on advertising which refers to property in connection with SMSFs.
• Stronger guidance on the importance of diversification for SMSFs.