Structural Cannibalism

On 23 June, Labor and the Greens did a deal to ban ordinary Australians from borrowing to build wealth inside their own super. No one voted for it. Here is what it actually does, and who it actually hits.

Most of us were told the same thing about superannuation. Work hard. Put a little away. One day you fund your own retirement instead of leaning on the government. That was the deal. That was the entire point of it.

So read the next part slowly, because it happened fast, and it happened quietly, and quiet is how the things that matter get taken.

Picture a couple in their early sixties who rent the home they live in. They never bought a house. Life ran the other way for them, the way it does for plenty of people who worked their whole lives and still never caught the property wave. What they did build was a modest self-managed super fund, and they had one plan left. One. Use that fund to commission a brand-new home, fund it with the single kind of borrowing the law allows a super fund to make, hold it to retirement, and walk into their seventies owning an asset instead of paying off someone else’s.

On the 23rd of June, that plan became illegal for anyone who has not already signed.

Hold that couple in your mind. We come back to them, because what was done to them was done to far more people than the announcement admitted, and it was done in a way every Australian should understand whether they have ever heard of a self-managed fund or not.

What actually happened

The government struck a deal with the Greens. In exchange for Greens votes to push a broader tax package through the Senate, it agreed to ban new limited recourse borrowing arrangements, the structure that lets a super fund borrow to buy property, for residential property.

The fine print is the whole story.

It improves the budget bottom line by about fifty million dollars, which in a Commonwealth budget is loose change. By the government’s own admission, self-managed funds make up less than one per cent of residential property borrowing, and under half a per cent of new residential borrowing each year. There was no Treasury consultation. No exposure draft. It was nowhere in the governing party’s election platform. It arrived as a negotiated amendment and was moving through the Parliament inside the same week it was announced, off the back of a two-day inquiry an independent senator called “a bit farcical”.

No real money. No real market. No mandate. Sit with those three at once, because when all three are true, you are not looking at policy anymore. You are looking at a price that got paid.

What is superannuation actually for?

Take the politics out and ask the plain question. What is super meant to do?

It is meant to build enough that a person funds their own retirement rather than the taxpayer funding it for them. That is the entire contract between a citizen and this system. And a fund grows in only two ways. It can store money and collect market returns, which is what the big institutional funds do. Or it can actively build, which for most ordinary balances has meant one careful thing: borrowing, once, conservatively, to own a real asset that compounds in a low-tax environment.

The borrowing rule that allowed this was built to be safe, not reckless. It is limited recourse. If the deal ever fails, the lender takes that one property and nothing else in the fund is touched. The rest of the retirement savings sit behind a wall. It was the cautious way for an ordinary person to own something they could never buy outright.

Remove it, and what is left? A savings account you are allowed to run yourself. For a fund of everyday size, taking away the building takes away the reason to be there at all. Which leaves the question this whole thing forces into the daylight. If super can no longer build wealth and can only store it, what is it for, and who would you rather was holding it?

You do not have to assume bad faith to notice the answer. The one corner of the super system the government cannot direct sits inside self-managed funds. It is also the only corner that could borrow. Ask who gains when that door is bolted shut, and follow the money rather than the motive. The conclusion is yours to draw. I am only pointing at where it sits.

The contradiction that gives the game away

Here is the part that should end the affordability argument for good.

In the same budget, the government restricted negative gearing to new builds from 2027. The reason it gave was supply. Reward the investment that creates new housing, wind back the investment that just competes for the homes already standing. It is a coherent line, and the government drew it on purpose.

Now lay the borrowing ban beside it. A super fund cannot borrow to construct. The law forbids it. The only compliant way a fund builds is to buy a finished house-and-land package on a single contract that settles on completion. Which means nearly every one of these deals brings a brand-new dwelling into existence. They add houses. They do not turn up at the auction of an established home and outbid a young family. They build supply.

So picture what a government genuinely worried about affordability would have done. It would have spared the new-build deals, the ones that add to the stock, and restricted only the established-home deals, the ones that might compete. It drew exactly that line for negative gearing. It refused to draw it here. It banned the deals that build new homes and the rest alike.

That one inconsistency is the tell. If supply and affordability were the real drivers, this measure would look like the negative-gearing rule. It does not. So the affordability story is the wrapper, not the contents. And by choking a channel that was quietly funding new homes, the ban is, at the margin, supply-negative. Sold to you as cooling the housing crisis. Quietly making it a fraction harder to build out of it.

Who this actually hits

The defenders will say there is a genuine risk here, that some people tip too much of a small fund into one geared property. And there is a fair point inside that, so let me give it its due. It is a point about people near retirement, who cannot ride out a downturn while they are drawing an income from the fund. Now apply it to a forty-five-year-old with decades of contributions still ahead and a downside already capped by the limited recourse wall. The concern stops fitting. And the honest fix for real concentration risk is a scalpel. A minimum balance. A borrowing limit. A diversification rule. Not knocking the whole house down.

Because look at who the ban spares and who it catches. It is gated on borrowing, not on wealth. The genuinely rich buy residential property with cash, in super or out of it, and nothing here touches them. The person who needed the loan, the modest saver who could only reach the asset by borrowing carefully against it, is the one cut off. A measure marketed as closing a wealthy investor’s loophole leaves the wealthy exactly where they were and takes the ladder off the saver.

They came for the ladder, not the mansion.

Their own words

The Greens called this a once-in-a-generation moment to help young Australians, and said they were fighting for the third of the country who rents. Hold that against the couple at the top of this piece. The young saver just lost the only structure that let them own an asset before they were old. The renters just lost a channel that was building new homes to rent. The people being fought for are the people handed the bill.

And the loophole. It is not a loophole. It is a borrowing provision first written into the Act in 2007, nearly two decades ago, doing exactly what Parliament built it to do, used by a small and cautious minority of funds. Calling a deliberate, long-standing law a loophole is how a political trade gets dressed up as a moral crusade.

The part that should worry every Australian, whatever they think of super

Here is the bigger thing, and it reaches far past property.

A government has changed a structural rule, with no mandate and no consultation, because a minor party demanded it as the price of unrelated votes. There is a word for a system that consumes the very structures built to make its citizens independent. It eats the things that hold it up. That is what this is. Structural cannibalism, served with a compassionate smile.

So where is the brake? In our system, what actually stops a government that holds the numbers but never asked us?

Work it through honestly, and the answer is the part that should keep you up. The courts test whether a law is legal, not whether it is wise or whether anyone voted for it, and this one is almost certainly legal. The Crown does not veto laws that have passed. You and I cannot put a statute to a referendum.

And then there is the Senate. Look at how this actually passed, because the mechanism is the scandal. The Senate exists to be a brake. It is the house of review, the place a government that controls the lower house still has to argue its case and can be forced to back down. That is the whole design. But a brake only works in one direction. When a single minor party holds the balance of power, that same chamber stops being a brake and becomes a lever. The Greens cannot form a government. They did not win one. What they can do is hold a government’s unrelated bill hostage and name their price. So a measure no party took to an election, that the public never saw coming, gets bolted onto someone else’s legislation and waved through as the cost of passage. It carries no one’s mandate. Not the government’s, which never campaigned on it. Not the Greens’, who never won the right to govern. The chamber built to stop exactly this kind of overreach is the chamber that delivered it. The safeguard became the weapon.

We have watched this machine run before. A Labor government short of a majority, kept in office by the Greens and the crossbench, paying for their support with a major economic change the public never voted for. Same template, running again.

Which leaves exactly one failsafe standing. Not the court. Not the Crown. Not the Senate. Not even the next election, which is years away and arrives long after the lenders have packed up and the damage has set. The only check left working in real time is an informed public and a press willing to say plainly that this had no mandate. Do not wait for someone else to say it. In a democracy where every formal brake is either unavailable or captured, the speaking up is the remedy. That is not a flourish. It is the last brake we have.

So say it

If you run a self-managed fund, or you advise people who do, or you simply believe super was meant to make ordinary Australians independent of the government instead of dependent on it, this is the moment to be heard. Not because the law gets undone this week. It will not. But because the one thing that has ever forced a government back to an unmandated measure is enough ordinary people refusing to let it slip past in silence. Share it. Send it to your member. Make it loud.

There are still doors open, and they are worth knowing. Existing arrangements are protected. Commercial property borrowing is untouched. Funds with the balance to buy outright still can. And as the deal currently stands, contracts signed before the start date are grandfathered, which, on the current timetable, makes the coming weeks matter for anyone already mid-deal. Those are conversations to have now.

Now picture that couple one more time. Picture them at seventy, still renting, because the one careful plan they had was taken off the table in a deal struck in a room they were never in, over a measure no one ever put to them. Then picture the other version, the one where enough people saw exactly what this was, and said so, out loud, while it still mattered.

Only one of those is still up to us.

I am writing this in a personal capacity, not as anyone’s authorised representative. I have spent years inside this part of the system, and I will not stay quiet while it is dismantled without a mandate. This is opinion and general commentary, not financial, tax, legal or credit advice.

Juan Jeffery — SMSF & property-finance strategist · Founder, Healthy Wealthy Investor