Queensland police officer Scott McPhee and his wife, a midwife, are among those expressing concern following recent government reforms banning lending on residential property within self-managed superannuation funds (SMSFs). The changes, introduced as part of a last-minute deal between the Labor government and the Greens, have disrupted investment plans for many Australians who rely on SMSFs to build retirement savings and property portfolios.

The McPhees, in their early 40s and earning approximately $270,000 annually combined, rent a home on Queensland’s Gold Coast and have five children aged between 9 and 19. Despite steady incomes, the couple found it challenging to save enough for a home deposit due to high living costs, including school fees and other family expenses. Approximately eight years ago, seeking to secure their financial future without relying on government pensions, they established an SMSF and purchased two investment properties worth a combined $1.4 million in the Moreton Bay region.

Under the recent reforms, future lending for residential property within SMSFs has been banned. While existing investments like the McPhees’ will be grandfathered, the changes effectively curtail the ability of many Australians to use this strategy going forward. This has sparked fears that younger generations will find it even harder to enter the property market or build wealth through superannuation.

“I don’t know how the kids can afford to get into their homes,” Mr. McPhee said. “Costs are going up, especially around Brisbane… What are the kids going to do?” He described the policy shift as “absolutely ridiculous,” emphasizing that it affects everyday workers rather than wealthy investors.

The reforms also address controversial aspects of negative gearing and capital gains tax concessions, prompting criticism from property developers and financial advisers. David Laverty, a prominent Queensland developer, warned that banning SMSF property lending could reduce housing supply, particularly in affordable off-the-plan units and townhouses, where SMSF investors previously accounted for an estimated 25 percent of buyers. He noted that the restrictions complicate financing strategies common among SMSF investors, who typically purchase apartments and townhouses in the $750,000 to $1.5 million range.

Financial advisers like Drew Haupt, co-founder of WLTH and involved in managing SMSF investments for clients including the McPhees, argue that the changes disproportionately affect modest-income Australians striving to build wealth. Haupt contended that the move protects union-backed industry super funds, which have lost members to the growing SMSF sector. He said his firm would seek other avenues to deliver returns but acknowledged that these policy shifts would make it harder for average workers to accumulate sufficient retirement savings.

Supporters of the reforms argue they are necessary to close loopholes benefiting wealthier investors and to promote fairness within the retirement system. However, critics maintain that the measures may inadvertently limit opportunities for hardworking Australians trying to get ahead amid rising living costs and a challenging housing market.

The debate underscores wider tensions in Australia’s superannuation and housing sectors, as policymakers balance competing interests related to retirement security, affordable housing supply, and the role of private investment through self-managed funds.