“It is a fantastic strategy for SME clients to look at LRBA arrangements to grow [their] business, to get involved with the ongoing improvement of the business and the success of them financially," he said.

Similarly, director of wealth management at mid-tier firm Pitcher Partners David Lane said while limiting borrowing in super is a step towards improving stability in the super system, it could have unintended consequences on small business owners. 

"Countless small business owners utilise the LRBA rules to own their business premises. With a blanket ban on borrowing within super, there may be a negative impact on small business around the country," he said.

In addition, LRBAs have rarely enjoyed a “period of stability” since they were permitted in super seven years ago, Mr Dunn said.

“The former government had two opportunities to remedy the 'property spruiking' by making s67A and 67B a financial product. We saw a recommended two-year review from [the] Cooper Review amount to nothing, and more changes to the law, and interpretations of the law than just about any piece of superannuation legislation,” Mr Dunn said.

“The notion of tax concessions on savings, not borrowed funds is a valid one, but in reality has the legislation ever really had an opportunity to play out for those that should have appropriately benefited? We may never know.”

The FSI’s recommendation to ban borrowing in superannuation, although only a recommendation, could potentially be the “final nail in the coffin” for LRBAs, Mr Dunn suggested.

“The 44 recommendations have now been released by Treasury for public consultation until 31 March 2015. I suspect the white flag by the super industry hasn’t been fully raised yet, but it would appear that a significant amount of work will be required for it to survive.”